Recruitment sector M&A activity Q1 2025

2025 got off to a solid start, with 21 deal completions involving UK assets, surpassing 2024’s average of 15 transactions per quarter.

This suggests continued grounds for cautious optimism for the M&A outlook in the sector in 2025, with deal volumes expected to build steadily on the performance of 2024 – particularly as the year progresses.

One trend we’re seeing in the market is that while the performance of many recruitment firms, especially those focused on permanent placements, is still rebuilding from a relatively low point in the cycle, there is now less risk from a buyer perspective of ‘over-paying’ and there is perceived room for growth. Aligned with that, consistency of EBITDA in line with expectations, avoiding any surprises in the deal process, and realistic valuations are proving crucial to getting deals over the line.

As we move towards FY26, there should increasingly be businesses able to demonstrate a growth and resilience in net fee income (NFI) and earnings to buyers, compared to the fluctuating recent years caused by the post-COVID-19 boom and subsequent downturn.

Like the rest of the world, however, we await the impact of the unpredictable developments stemming from the new US administration, including tariffs on the wider economy and private equity (PE) market.

Key themes for Q1 2025 in recruitment sector

• Growing interest from US and European buyers.
• Renewables/energy, technology and recruitment platforms/software, as well as blue-collar engineering/construction/industrial sectors as key specialist staffing verticals.
• An even mix of trade/PE exit routes.
• Continued growth in bolt-ons by PE-backed trade.
• Low activity in overseas assets acquired by UK buyers.

European buyer interest in UK-based assets grows

Excluding the two management buyouts in Q1 2025, four of the 19 acquisitions (21%) of UK targets were completed by a non-UK buyer, maintaining a similar level of overseas buyer interest as seen across 2024.

Of these four acquisitions, two were completed by US buyers and two were completed by French buyers. In 2024, we saw US buyers dominate acquisitions in this market, and European buyer interest decline.

A notable example of recent deals is the acquisition of Mactech Energy Group by French nuclear engineering firm Assystem. Mactech Energy Group is a leading UK company renowned for its expertise in construction capabilities within the nuclear industry. This acquisition represents a strategic, long-term investment in the UK's nuclear workforce, in anticipation of the projected construction of up to 24GW of new nuclear technology in the coming decades.

Continued sub-sector interest in technical fields and growth in blue-collar recruitment

Q1 2025 continued to experience high levels of interest for recruitment into specialist fields such as technology (14% of deals), recruitment platforms/software (14% of deals), and renewable energy (10% of deals). In addition to Mactech, the renewable energy sector saw the acquisition of Hyperion Search by HC Group.

While deal activity is typically higher in the specialist technical subsectors of recruitment, this quarter saw a notable increase in activity within blue-collar recruitment sub-sectors (14% of deals) and multi-sector recruitment (10% of deals).

We were delighted to provide sell-side diligence to support the strategic carve-out divestment of Gap Personnel by Open Up Group Inc, a large Japanese-listed group. Gap specialises in the industrial, manufacturing, and warehouse logistics sectors and was acquired by PE firm Rcapital Partners, with leveraged support through debt facilities from Secure Trust Bank.

Trade exits continue to lead the way, but PE interest continues – especially through add-on deals

In 2024, we saw trade exits consistently outperform PE exits, with 33 trade deals (52%) and 24 PE deals (38%) across the whole year. This was attributed to recruitment companies looking towards acquisitions to expand industry verticals and tap into new markets amid challenging marketing conditions. In Q1 2025, trade exits remained the preferred exit route but by a lower margin, with trade buyers responsible for 10 (48%) acquisitions of UK assets, and PE buyers responsible for nine (43%).

UK PE currently holds record levels of capital ready for deployment. Post-COVID, most PE firms have tended to be increasingly selective in choosing the right opportunities. However, the sheer range of players in the market with varying strategies, risk appetites and areas of focus means deals continue to happen, especially through add-ons to existing portfolio companies seeking to accelerate growth.

For example, MML Capital’s bolt-on acquisition of Mindquest into the Freeland Group marks its seventh acquisition in four years. As an early adopter of AI in recruitment, Mindquest was acquired to enhance the Group’s tech-driven platform for freelance recruitment in IT and finance. Mindquest's expertise includes SAP consultants, developers, cybersecurity specialists, and financial experts. This deal underscores PE’s strong interest in investment opportunities that expand their portfolio’s technology capabilities and streamline existing operations.

Q1 2025 also saw two management buy-outs; Hernshead Group (STEM) and Pure Resourcing Solutions (multi-sector, including professional services).

Shift back to PE bolt-ons

PE focus in the sector has gradually shifted to add-ons for existing PE-backed portfolio companies. In 2023, primary PE deals accounted for 74% of the total completed PE transactions. In 2024, primary PE deals accounted for 58%. In Q1 2025, primary PE investments only accounted for 22%, with secondary bolt-ons accounting for seven of the nine PE transactions.

This trend underscores the cyclical nature of the PE investment cycle, as PE investors seek bolt-on acquisitions to diversify, enhance organic growth and realise returns within their typical 3–5-year exit horizons.

A transaction that highlights this strategy is the acquisition of Nlist by The Specialist Group (TSG), backed by Oaktree Capital Management. Oaktree acquired TSG in 2022 and has since made several acquisitions to continue to expand its capacity to provide technical specialists for projects in markets such as energy, industry, infrastructure, high-tech and life sciences. These acquisitions have grown the client base to over 600 in various geographies and sub-sectors.

Also notable is the interest in the wider theme of workplace solutions, engagement and consultancy. We assisted Oakley Capital-backed Phenna Group in acquiring Great Place to Work UK, one of more than two dozen acquisitions we’ve supported them on globally in the broader testing, inspection, certification and compliance (TICC) space.

Continued drop in overseas assets acquired by UK buyers

In Q1 2025, only two transactions completed in which a UK buyer acquired an overseas recruitment asset, half of what was achieved in Q4 2024. This continues a trend of refocus on the UK market, (or expansion organically by growth through relocating or recruiting key individuals overseas to build teams) with 14 overseas acquisitions in 2024, down from 21 in 2023.

Jonathan Wade, Partner at RSM UK said: "The stats support what we are seeing first hand: a bit more activity in the market, especially with trade and PE-backed trade. This is consistent with our deal pipeline.

Relative stability and resilience in business performance, including cost rationalisation, have helped reduce trading uncertainty compared to about a year ago, when heightened volatility made transactions difficult. This is supported by more realistic valuations when compared to during the post-COVID-19 bounce.

While the industry has seen a number of false dawns, and the impact of potential US tariffs on deal activity remains uncertain, the overall trajectory points toward a gradually improving environment for transactions in the sector."

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