Recruitment sector M&A activity quarterly update

Quarter 3 2023

Overview

The recruitment merger and acquisitions (M&A) market outlook remains resilient against the backdrop of current economic challenges, with deal completion activity starting to rise compared to a low in Q2 2023. 

Key themes

The key themes include the continuing activity in overseas add-ons by UK acquirers; technology and healthcare remain the most active sectors; signs of acquirers seeing opportunities where sellers are experiencing cash flow pressures; whilst primary UK private equity (PE) deal activity (as expected) remains subdued.

A total of 16 deals were completed, 12 of which were of UK recruitment targets and four which were of international recruitment targets acquired by UK buyers. This compares to 15 total deals completed in Q2 2023. Previously, Q3 2022 was the most active Q3 in over three years, with 20 deal completions of UK targets. This reflected exceptionally strong transaction numbers off the back of  Covid-19 and a recruitment industry boom.

Private equity add-on acquisitions, showing an appetite for international expansion

The percentage of deals accounted for by PE remained strong at 50%, reflecting the appetite for overseas add-ons. Half of the eight PE deals were UK companies buying overseas targets. 

UK PE deals included Twenty20’s primary acquisition of Austin International (having acquired Medacs and regional staffing businesses from Impellam in Q1 2023) and Fremman Capital’s acquisition of Healthcare insourcer Medinet. Additionally, Life Science People secured an additional £4m in growth funding from US PE Silchester Partners. 

In the secondary PE market, software platform Diversely was acquired by The Access Group (backed by TA Associates) and tech and consulting business Jumar was acquired by Aliter Capital, the PE owner of tech resourcing specialist Concept Resourcing.

The US again proved to be the most desirable location for UK buyers this quarter with four deals. This included Acacium’s acquisition of Sumo Medical (another sector deal advised by RSM UK, see below).

Alternative exit routes included Vantage Market and Clive Henry Group performing management buyouts (‘MBO’).

Healthcare and technology, the most active sub-sector verticals

In the UK, healthcare and life sciences was the most attractive sub-sector (three deals), followed by technology (three deals). 

There was a recurring theme of diversification of product offerings, such as the digital consulting capabilities of Jumar and Hoffman Carluchi’s acquisition of Umbrella Check compliance services.

‘The number of completed deals continues to reflect the theme of fewer new processes started in the first half of the year, and the extension or pausing of timelines of transactions in progress. Using this time to prepare, and ensuring the right data is collected is  key to an effective sale process.

We were delighted to have performed financial and tax due diligence on Acacium’s US healthcare deal with others in progress. This is expected to start to flow through in the next quarter. Additionally, we are seeing the pipeline build into Q1 2024 as businesses assess their best options and timing’.

Q3 2023 M&A Activity in the UK Human Capital Sector

Q3 2023 M&A Activity in the International Human Capital Sector (by UK buyers)