Recruitment sector M&A activity quarterly update - Quarter 1 2024

14 May 2024

The recruitment M&A market began the year with a total of 24 deals completed in Q1 2024, 17 being UK recruitment targets and seven representing overseas targets acquired by UK investors. The number of UK deals was broadly in line with the run rate for 2023, but with a marked increase in appetite for international expansion by UK investors (compared to only two overseas acquisitions by UK investors in Q4 2023).

The impact of economic conditions on business performance and EBITDA is still a constraint, especially for sellers, but private equity markets are still functioning well to transact where performance is holding up. Appetite for add-ons and geographical diversification is returning as buyers seek to supplement organic performance by building value through acquisition. Notable deals in the sector include the sale of Morson Group to Canadian-backed Onex private equity.

Private equity markets still functioning well where performance is holding up  

Private equity was responsible for 47% of acquisitions of UK assets in Q1 2024. Private equity demonstrates a continued appetite for new investments, for the right businesses, with 63% (five transactions) of the eight private equity deals being primary deals and three add-ons. 

Despite uncertainty in the UK economy, the UK recruitment sector attracted interest from overseas private equity firms in Q1 with three of the seven private equity transactions being overseas investors. This included the sale of Huntswood, a UK-based resourcing, outsourcing and advisory financial services sector specialist, to ResultsCX, private equity backed by India-based ChrysCapital. Additionally, the sale of Morson Group, the staffing specialist with a strong STEM focus in areas such as aerospace, to Onex Capital, the Canadian private equity firm who also own healthcare specialist Acacium. Interestingly, Morson Group acquired executive search firm InterQuest shortly ahead of the sale.

Other deals demonstrated the range of opportunities in the sector in the current market. These included on the one hand the carve out and acquisition of Staffing 360 Solutions UK business with brands such as CBS Butler, and verticals in engineering, technology and aerospace by recruitment sector specialist firm IPE Ventures. Additionally, we note the acquisition of Compass Recruitment, the healthcare, life sciences and education recruitment specialist, by CowCorner.

Diverse subsector mix, including professional services, healthcare and STEM

There was a broader sector profile mix in the quarter. Professional services was the most popular subsector with four deals, followed by healthcare and life sciences, with three deals, and noting significant STEM/technical recruitment deals.

We’re delighted that RSM supported Bluestones Group, a recruitment and investment specialist, on its double acquisition of New-Zealand-based Home Recruitment, and its sister business in London, Australasian Recruitment Company, a professional services and administrative support specialist.

Healthcare and life sciences again remained active in Q1. Whilst certain segments of the market have been impacted, compared to strong historical levels, by government edicts restraining demand, fundamental supply shortages and diversity across specific niches means continuing interest. Deals included the strategic trade sale of ID Medical, a provider of healthcare and clinical services recruitment with a strong managed services presence, to Aya Healthcare, a US provider of nursing and interim leadership professionals. 

UK acquirors increasingly active in Europe for expansion

There was a marked increase in UK acquirors expanding overseas. Whilst the US remains the most popular overseas acquisition choice for UK investors, accounting for two of the seven overseas deals by UK investors in Q1 2024, Europe is very much on the radar. In particular, the Netherlands appears attractive and accounted for two deals. This included the acquisition of recruitment software business, Homerun by Invincible Software Holdings, a UK based SaaS PE firm, together with expansion in the renewables space by OEG Renewables.

UK investors also targeted businesses across Norway, Germany and Denmark.

Final comments from our expert:

Jonathan Wade, RSM Corporate Finance’s recruitment sector lead, comments:

'The impact of economic conditions on business performance and EBITDA is probably still the biggest constraint on deal activity, but markets are still functioning well to transact where performance is holding up. Buyer appetite, especially for add-ons, overseas expansion or faster-moving opportunistic deals, is notable and we were delighted to support Bluestones in this regard.

As the outlook on interest rates and the wider economy is set to improve as the year progresses, we have some interesting work in our pipeline as the sector continues to show its resilience.'

Please contact Jonathan Wade, Clodagh Tunney or Neil Thomas for a wider conversation or for a list of the sector transactions.