Information technology staffing is hot, and so is the M&A market with buyers on the lookout for purchasing a solid IT staffing firm to take advantage of the growth in the IT staffing market.
According to Staffing Industry Analysts’ 2013 Staffing Mergers and Acquisition Activity and Multiples report, 23 percent of the publicly announced staffing mergers and acquisition deals in 2013 were in IT staffing segment. This is corroborated by the Staffing Industry Pulse Survey, in which respondents indicated IT acquisitions to be a similar share.
Even stronger IT buyer inclination was pretty clear in SIA’s 2013 Staffing Acquirers Shopping List. Some 255 staffing firms opted to join the list (nearly 50 percent more than the previous year), each providing their top three segment and geographic preferences for a potential acquisition. The three most commonly mentioned segment preferences were information technology (appearing 127 times), IT solutions/SOW (60 times), and direct hire staffing (53 times).
Most of these buyers are IT staffing firms and their desire to acquire is stemming from a strategic interest to further establish themselves in certain geographic markets where they don’t have a strong foothold, or to add to their service offerings. There are also some non-IT staffing firms that are looking to enter the IT staffing market. Then there are private equity firms that have been paying the IT staffing industry a good amount of attention, especially since some high profile acquisitions such as On Assignment Inc.’s (NYSE: ASGN) purchase of Apex.
This level of interest is not surprising. The performance of the IT staffing industry has been pretty strong coming out of the recession. Demand from the mobile market, all things social, cloud computing, security, and shall we say big data, are continuing to drive growth in the IT market. Most importantly, employment growth in IT continues to outperform growth in total U.S. employment. Employment growth in industries that purchase IT staffing has remained steady at around 2.0 percent year over year throughout 2013, faster than the overall U.S. employment growth of 1.6 percent. Additionally, it’s still a tight IT labor market, especially in categories such as network and computer systems administrators and database administrators.
All this bodes well for the IT staffing industry. Staffing Industry Analysts estimates that the IT staffing market will grow 7 percent to reach a size of $24.2 billion in 2013 and forecasts further growth of 7 percent in 2014, with the market growing to $25.9 billion. This is not to say that growth in this segment will continue its upward path indefinitely. Nothing is permanent, and the IT staffing boom will also plateau, but it may be a while. This means that strategic buyers will still be on the lookout for a solid and sound IT staffing company that will help them ride the IT staffing growth wave.