Recruitment sector M&A activity quarterly update

The recruitment mergers and acquisitions (M&A) market finished the year with another consistent performance in Q4 2023, maintaining the resilient outlook from Q3 2023. The 18 deals completed in Q4 2023 represent continued momentum following a dip in Q2 2023. This resulted in a respectable 58 completed transactions of UK assets in 2023 despite challenging macro-economic conditions.

This is understandably down from the bounce post-Covid, reaching a high of 76 completions in 2022, but in line with 2021 (58 deals). Current trajectory suggests that the 2024 deal tally is likely to be somewhere between these two numbers.

Key themes

The key themes include:

trade buyer-led activity, closely followed by private equity who focused on secondary add-on transactions in Q4 2023;
technology remained the most popular vertical, but interest in the education sector reached new heights, coming in second place this quarter; and
the US continued to be of the most interest to UK buyers expanding overseas, albeit UK acquisitions remained the most popular.

A total of 18 deals were completed, 16 of which were of UK recruitment businesses and two were of international recruitment targets acquired by UK buyers. This is broadly consistent with both Q3 2023 (16 total deals) and Q4 2022 (17 deal completions of UK targets).

Private equity (PE) interest in UK recruitment remained resilient

The percentage of acquisitions backed by PE buyers remained strong at 44%, with PE focusing on value-add through bolt-on transactions. 57% of the seven PE deals in Q3 were add-ons for existing PE-backed trade acquirers.

Despite challenging market conditions, PE buyers are still investing where the value drivers are strong. Mobeus Equity Partners completed a £10m minority investment in IT recruitment specialist Ellis Recruitment Group, a niche tech business with international potential. This investment was for the purpose of expanding the business geographically and through acquisition.

In the secondary PE market, notable PE-backed trade deals included the acquisition of the STEM focused recruitment business Impellam Group by Headfirst Group, Icelake Capital and Kartesia.

This followed the carve-out and acquisition of Impellam’s healthcare division by Twenty20 Capital back in March 2023.

Education and technology verticals strong in Q4 2023

Technology continued to be the most attractive sub-sector in Q4 2023 (six deals), followed by education (three deals).

RSM were able to support Irish PE firm, Erisberg, in their acquisition of Fruition IT Resources. Fruition IT is a specialist technology recruitment firm with a growing niche in IT consulting which complements their existing Irish portfolio asset Eolas.

The education vertical is more resilient to macro-economic trends and in Q4 activity peaked with three of the five education deals in 2023 arising in that period. Following recovery post-Covid, increased teacher shortages across the UK are creating higher demand for recruitment firms in this space.

Notably, Humly - the education recruitment specialist, backed by Viking Ventures - acquired specialist teaching agency M2 Education. This is Humly’s fifth acquisition and highlights the opportunity for consolidation.

The US continues to be of interest to UK buyers

With international growth a key aspiration of many, UK buyers continued to acquire across US targets in Q4 2023. For example, UK based Veracity Consulting acquired Kansas based recruitment agency Velocity Staffing.

UK targets saw interest from the Netherlands (one deal) and the US (one deal).

2024 UK recruitment sector M&A outlook

The resilience of activity in the UK recruitment sector in 2023 has been notable, given tougher economic conditions. The outlook for 2024 starts from higher deal momentum in the second half of 2023, and we’ve already had a further RSM deal completion in Q1 this year (not yet announced).

The wider economic and political outlook continues to be uncertain, however, and we might expect stronger momentum in the second half of 2024 once businesses have re-established a firmer growth trajectory.

Transactions

The below tables detail the transactions occurring within the UK and international human capital space in Q4 2023, with PE deals shown in bold.

Q4 2023 M&A Activity in the UK human capital sector

Deal date	Company	Target description	Investors
Oct-23	M2 Education	Operator of a UK-based platform that provides recruitment services for the education sector. The company's portal offers career opportunities for teachers, assistants and nursery staff. It also helps employers find the right candidate for a job profile, thereby helping schools to find the right staff for their needs.	Humly
Oct-23	Magnus Search	Provider of recruitment services catering to several sectors including manufacturing, industrial, business, commercial, and legal. The company offers staffing services such as search and selection, interim staffing, succession planning and project recruitment. They handle contract-based, permanent, temporary, and temp-to-perm recruitment.	Arrow Workforce Solutions
Oct-23	Fruition IT Resources	Operator of a recruitment firm intended to serve the information technology (IT) industry. The company offers recruitment advisory, project outsourcing, and staffing on a permanent and contract basis. They also offer various information technology job postings, thereby enabling their customers to find the right people for the right roles.	Erisbeg Management
Oct-23	Darogan Talent	Operator of a recruitment hub intended to connect graduates with graduate opportunities in Wales. The company promotes the world of work across the nation, provides the latest news and advice, and expands the professional network. This enables its clients to find graduate jobs or courses, explore the members’ area, and connect with leading employers in Wales.	Equal Education Partners
Nov-23	Blue Octopus Recruitment	Developer of management software designed to serve the recruitment sector. The company specialises in talent management tools, using advanced technology to streamline and elevate its recruitment and human resources practices. This enables clients to access a comprehensive package of products and services, resulting in savings in both time-to-hire and overall cost.	HgCapital Trust, Intermediate Capital Group, IRIS Software Group
Nov-23	Paratap Partnership	Provider of permanent and interim staffing services, specialising in executive search, qualified finance, and private equity. The business also runs a series of networks for both CFOs and managers across HR, talent and business leaders.	EOT
Nov-23	Elite Cyber	Provider of specialist recruitment services across the cyber security market. The business recruits roles such as: vulnerability controller, IT security manager, consultant, engineer, or computer system architect. The company provides services such as permanent or temporary staffing, as well as recruitment process outsourcing.	Eurocom Group
Nov-23	BioTalent	Provider of specialist recruitment services across life sciences, research and development, regulatory, quality, clinical and data science. The company provides embedded hiring solutions, outsourced hiring solutions, as well as permanent search services.	The IN Group
Nov-23	Parity Professionals	Provider of IT recruitment services based in Manchester, United Kingdom. The company is focused on maximising the effectiveness of people, processes and technology. This enables the right talent to identify, develop, and meet their business objectives.	Network Ventures
Nov-23	Future Build Recruitment	Operator of a construction recruitment agency intended to connect candidates with technical roles in the UK and abroad. The company specialises in sourcing general main contracting, fit-out, house building, high-end residential construction, social housing, specialist sub-contractors, and other job profiles.	Hercules Site Services
Nov-23	Class People	Provider of education staffing services intended for schools across the United Kingdom. The company assists in the hiring of teachers, teaching assistants, tutors and early years practitioners for day-to-day cover. These include long-term roles and permanent vacancies, enabling clients to recruit trustworthy individuals.	MBO
Dec-23	Onyx Recruitment	Provider of recruitment services based in Newcastle, United Kingdom. The company offers permanent, contract and temporary recruitment solutions, as well as internships. Their services span across digital and technology, marketing, creative, human resources and operations, and finance and accountancy sectors.	Concept recruitment
Dec-23	Heat Recruitment	Provider of recruitment solutions intended for digital and technology, financial services, insurance, legal, sales, and public sector divisions. The company offers contract, contingency, exclusivity, retained, and search recruitment assignment services, thereby helping companies find employees according to their needs.	Smart Solutions Recruitment
Dec-23	Provision Recruitment	Provider of staffing and recruiting services specialising in the placement of permanent and temporary staff within the further education (FE) sector. The company offers personalised candidate searches, headhunting, and targeted job advertising, enabling colleges to find permanent and temporary positions.	BGF, HSBC Holdings
Dec-23	Impellam Group (LON: IPEL)	Impellam Group PLC provides managed and specialist staffing services. The company operates in four segments: global managed services, STEM, regional specialist staffing, and healthcare. Some of its brands include Guidant Global, Comensura, SRG, Lorien, Carbon60, Blue Arrow, Tate, and Coestaff. Its geographical segments are the United Kingdom, Europe, North America, and Australasia.	HeadFirst, IceLake Capital, Kartesia
Dec-23	Ellis Recruitment Group	Provider of staffing services focused on information technology (IT) professionals. The company specialises in the recruitment of skilled employees on a permanent and contract basis for industries ranging from established technologies and applications, such as Oracle, SAP, and Microsoft, to next-generation cloud solutions like Salesforce and Workday.	Mobeus Equity Partners

Q4 2023 M&A Activity in the international human capital sector (by UK buyers)

Deal date	Company	Target description	Investors	Target country
Nov-23	Velocity Staff	Provider of staffing services based in Leawood, Kansas. The company specialises in information technology, engineering, science, and business solutions services. It also offers business intelligence development, reporting, analytics, and dashboarding industries, while providing opportunities ranging from contract and contract-to-hire positions to permanent placement.	Veracity consulting	United States of America
Nov-23	Savage Partners	Provider of retained executive search services intended to serve software, e-commerce, and internet-enabled companies. The company's services include executive and related human resource staffing services that use a team-driven approach for cultivating and developing relationships with investors and technology executives.	Russel Reynolds Associates	United States of America

Disclaimer: the above information has been aggregated from information within the public domain (sources: PitchBook, Mergermarket) and RSM has made no attempt to verify its accuracy or completeness.