Significant growth in headline volumes

M&A activity in the UK recruitment and workforce solutions sector continued to strengthen in 2025, with 74 transactions completed, compared to 63 deals in 2024 and 58 in 2023. This represented a 17.5% increase on 2024, following a 27.6% rise in 2024 from the cyclical lows of 2023.

The headline volume trends in 2025 reflected a favourable M&A environment for strategic buyers. Declining interest rates, stabilising trading conditions (compared to headwinds of previous years) and a narrowing expectation gap between buyers and sellers all contributed to a more supportive market.

The increase in completed deals suggests that active and well-capitalised buyers are now finding greater opportunities, especially in assets that demonstrate strong operational resilience, deep specialist capability or technology-enabled growth potential. Meanwhile, the market has benefited from divestments by larger corporates, and other buyers have taken advantage of semi-distressed opportunities from weaker firms.

The buyer pool has changed fundamentally since 2023

These headlines, however, don’t tell the full story, as detailed in the graphic below:

Strategic trade buyers remain the most active buyers, but the focus of private equity (PE) has noticeably shifted. PE appetite for new platform investments has been cautious and primarily focused on innovative HR tech software platforms. Conversely, the role of PE-backed trade to add value and scale through add-on acquisitions has tripled. PE continues to influence sector activity and trends, but the mix has reversed since 2023.

This helps to explain why deal execution has remained selective. As multiples for UK listed businesses in the sector have fallen, investment committees have exercised greater caution. The bar for pursuing new platforms or larger deals has risen, while there is greater momentum to accelerate growth through expansion into new verticals or geographies via add-ons to existing businesses.

This in turn has driven requirements for strong business cases and flexible deal structures with earn-outs to bridge buyer-seller value expectations. The need for sellers to prepare thoroughly and be ‘data-ready’ to withstand buyer scrutiny has never been stronger.

Quarterly M&A trends

The first half of 2025 saw a clear acceleration in M&A volumes of UK firms in the sector. Both Q1 and Q2 recorded 21 completed transactions, significantly higher than the quarterly average of 15 deals in the previous year.

By contrast, deal volumes moderated in the second half of 2025, with Q3 and Q4 each recording 16 transactions. Activity remained resilient at just above the 2025 average, but the concerns highlighted above were certainly in play. Dealmakers focused on smaller, safer transactions rather than pursuing large, ambitious ones.

From our conversations with business owners across the sector, we observed a more mixed picture as the year progressed. Whereas in 2024, fees and EBITDA performance were typically subdued as many firms were rebuilding, in 2025 we saw a greater variation in performance. Businesses performing strongly may be prepared to back themselves and aim for exits in 2026 or 2027 when wider market conditions may also be more favourable.

Which buyers were most active in 2025?

Trade buyers: Trade continued to be the predominant exit route in 2025 and the mainstay of the market. There were 35 trade transactions, representing 47% of total acquisitions. This was broadly in line with the 33 trade deals completed in 2024, though slightly down from 52% of total transactions that year. Among these deals, 29% (10 deals) involved overseas acquirers entering the UK market, highlighting ongoing strategic interest from abroad in UK assets.

PE: PE investors backed 27 deals, representing 37% of total activity and comparable to 2024. However, the mix between primary, platform deals and add-ons has reversed. In 2025, PE-backed trade buyers completed 19 add-on deals, accounting for 70% of total PE deals. As discussed, this trend reflects the growing scale and ambition of PE-backed platforms.

Overseas acquirers: Overseas interest in UK assets remained evident in 2025, accounting for 19% of all deals, down from 25% in 2024. The mix of inbound buyers was more varied than in the prior year. Whereas US buyers made up 56% of overseas deals in 2024, this fell to 36% in 2025, with more interest from Europe and Australia. See Overseas buyer focus tab for further analysis.

Employee ownership trusts (EoT), private individuals, management buy-out (MBO): These types of deals increased from six in 2024 (eight in 2023) to 11 deals in 2025. Notable deals include RGF Staffing UK and the buy-out of Private Equity Recruitment (PER) in Q3 2025.

It’s important to consider the reversal in the mix of PE platform deals versus PE add-ons within the context of the wider PE market.

The growing role of PE-backed platforms as acquisitive buyers is consistent with trends across all PE deals in the UK, as illustrated below.

The falling ratio of platform deals to add-ons by PE-backed firms is a longer-term trend, moving to a 30/70 mix on average. PE firms have generally been holding assets for longer and prioritising value creation at the portfolio company level. This has led to heightened focus on inorganic growth to enhance scale, drive synergies and diversify across geographies and adjacent verticals. Market fragmentation continues to provide scope for opportunities.

Examining market areas targeted by PE investment is instructive. In 2025, 50% of new PE platform deals were in HR tech whereas PE-backed trade deals covered a greater variety of verticals, with a strong focus on professional services and technology.

In the education vertical, THI Investments’ backing of Empowering Learning illustrates an important theme of reinvention and diversification. Graphite Capital’s original investment (supported by RSM) was into education staffing. Over time, however, the firm shifted emphasis to tech-enabled and software solutions to drive value creation.

Diversification is also a key theme for acquisition. Onex-backed Morson Group has rebranded into four strategic business units to provide silo-free access to consultancy, talent and training. RSM supported the technical recruiter’s acquisition of 3B Training as part of its expansion strategy.

RSM also provided sell-side due diligence for Japanese-listed Open Up Group on its divestment of Gap Personnel to Rcapital. This is a good example of a large corporate realising cash to reinvest in its core markets through a non-core asset disposal.

PE-backed exits in the sector have been limited over the last couple of years. This reflects the change in the market since the post-Covid boom, with investments made in that era being held for longer. It will be interesting to see how this evolves in 2026 and 2027 as business models and EBITDA rebuild.

There were relatively few ‘safe haven’ sectors in 2025, with no single sub-sector vertical standing out. Firms contended with geopolitical uncertainties and macro-economic pressures, while the perceived threat of AI disruption continued to affect most verticals, particularly the lower-skilled traditional staffing models.

Regulatory challenges also played a significant role. Tighter immigration policies have impacted candidate supply, Budget-driven National Insurance Contribution (NIC) increases have affected margins, and the implementation of the Employment Rights Act 2025 has increased compliance costs and operational complexity. Additionally, public sector budget and agency usage constraints have severely impacted parts of the healthcare market. While US-centric firms have typically fared better than those in the UK, even they have faced challenges with tariffs and political uncertainty.

Against this backdrop, HR recruitment platforms and software businesses stood out as a more attractive proposition, accounting for 19% of total deals (14 acquisitions) in 2025, a notable increase on 2024. The sector attracted particularly strong PE interest, with 10 of the 14 platform and software deals in 2025 involving PE-backed buyers. This heightened appetite reflects the potential for disruptors to capture market share, together with the appeal of resilient, subscription-based revenue models that drive higher multiples.

The shift to these assets also underscores the growing impact of AI, especially on hiring decisions. Graduate and lower-skilled hiring are becoming more cautious, even though people in senior roles are under increased pressure to drive and manage change and teams in a fast-moving world. Staffing and talent solutions firms are having to adapt fast as the nature of opportunities evolves.

Recruiters themselves are placing greater emphasis on AI, automation and data analytics to enhance candidate experience, improve client retention and optimise placement efficiency. Innovation is driving solutions to automate candidate sourcing, screening and compliance, supporting productivity while freeing up more time for fee-earners to drive growth.

M&A activity in 2025 was spread more evenly across other verticals. The engineering and industrials sector was the other most notable sub-sector, with 19% of total deals (14 deals) in 2025, with infrastructure and built environment benefiting from consolidation activity. Trade buyers completed nine of the 14 acquisitions in this sector in 2025. Notable transactions included the acquisition of Mactech Energy Group by Assytem.

Overseas bidders remain important, but have fallen slightly in mix. In 2025, just under one in five deals (19%) was an acquisition by an overseas bidder (14 deals) compared to just over one in four deals (26%; 16 deals) in 2024.

This reduction was driven in part by lower activity from US buyers. In 2024, US investors completed nine UK acquisitions, whereas in 2025 this fell to five deals. Nevertheless, this was still ahead of the two US-led transactions in 2023.

Political change in the US, tariff uncertainties and changes in the labour market following the October 2024 Budget and changes to NI rates from April 2025 have not helped. Nevertheless, the US economy performed more strongly over the second half of the year, suggesting US buyers will continue to be a key feature of the market. In contrast, European buyer activity increased modestly with seven deals in 2025, up from four deals in 2024. The 2025 deals came from France (three deals), Ireland (two deals) and Sweden and Germany (one deal each).

We also noted two acquisitions by Australian investors in 2025. These comprised Cordish Dixon Private Equity Fund’s investment in Cappfinity and ELMO Software Limited’s acquisition of RotaGeek Limited, both of which were recruitment platform and software transactions.

In 2025, UK firms completed 11 overseas acquisitions, a slight decrease from 14 in the previous year.

The US remained the largest outbound target geography, accounting for four deals (36%) in 2025, down from six acquisitions (43%) in 2024. This reduction likely reflects increased caution among UK acquirers due to trade and policy uncertainties in the US market. The Netherlands recorded two acquisitions in 2025, consistent with the prior year. In addition, UK buyers completed acquisitions across a wide range of geographies, including Belgium, Estonia, Portugal, the UAE and Indonesia.

Notable deals included Menzies Aviation’s $305m acquisition of G2 Secure Staff to strengthen its position as the largest aviation services provider in the US, and Morson Group’s expansion of its US talent solutions footprint with the acquisition of US-based technical recruiter PTS Advance. Another significant transaction was Hydro Energy Group’s acquisition of Seven Shores Recruitment Group (now rebranded Vantari) as part of its strategy to expand capabilities in the defence and critical infrastructure recruitment sectors.

M&A in recruitment: what to expect in 2026

The wider business services sector is expected to perform better in 2026 than 2025, with consensus forecasts indicating modest organic growth and modest margin improvement based on a gently improving macro environment.

Valuations are still attractive relative to history and related sectors such as consulting, contributing to an expectation of improving M&A activity. Such activity will be required to achieve financial sales targets and exit ambitions in 2026 and 2027, and the fragmented and resilient nature of the sector will continue to generate opportunities.

We also expect to start to see meaningful productivity savings in 2026 through greater automation and use of AI, a point underlined by business leaders at our recent industry seminar on this topic. The full run rate will take longer to mature, but most firms in the sector are now actively piloting or adopting AI, and the pace of change is likely to accelerate.

Many businesses have now largely gone through the hard work of resetting cost bases, improving processes and refocusing strategy. Firms emerging from this cycle as more resilient businesses will prove attractive to buyers. A number are now seeing EBITDA accretion and are forecasting further growth. We expect to see more success stories arising in 2026 and 2027 as these trends mature. This in turn would have a positive impact on the market.

We expect the premium, C-suite and advisory end of the market to be lifted by the $1.3bn Advent-led acquisition of US search and leadership advisory firm Heidrick & Struggles, announced in Q4 2025. The appetite of US PE appears more pronounced than in the UK and Europe at present, and UK firms with a proven business model and a strong US market presence or foothold in Europe are likely to prove attractive.

This has already been underscored in Q1 2026, with US PE Southfield Capital’s majority investment in Metric Search, a $100m deal that RSM were delighted to support with sell-side due diligence. Founded in only 2019, Metric has grown rapidly especially in the US in higher growth verticals such as MedTech, life sciences and engineering.

Themes of innovation and diversification will also continue. Workforce solutions businesses now comprise a broad range of offerings beyond traditional staffing and talent solutions, including training, consulting / statement of works, services and advisory, recruitment process outsourcing (RPO), and hire, train and deploy models, as well as HR tech or tech-enabled platforms. Expansion into these areas is likely to drive increasing M&A activity.

We also expect to see continuing appetite for overseas expansion. Well-capitalised investors will remain ambitious to enhance returns given the subdued growth and competitive nature of many local markets. Inbound investment into the UK will also continue to be important, illustrated by French headquartered global staffing firm Groupe Adequat’s first UK acquisition in Q1 2026 of Solutions Driven – another deal where we were delighted to be chosen to provide buy-side diligence services.

A lasting trend in M&A is the growing value of data-readiness. We’re working with sellers well in advance of a deal process, often before an M&A adviser is appointed. At RSM, our integrated team combines real-time, industry-led deal analytics experience with extensive deal expertise to help businesses get on the front foot early. Presenting the key value trends, a suite of KPIs and a single source of the truth is fundamental to protecting and enhancing value once the rigour of the deal process begins.

For more information or to discuss how we could help realise your business growth ambitions, please contact Jonathan Wade or Neil Thomas.

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