Partner Article

Recruitment ‘bucks trend’ as private equity drives deals volumes in sector

The UK recruitment sector is ‘bucking the trend’ with M&A deal activity for the first six months of the year, recording its highest level since the ‘Covid bounce’ of 2021.

Between January and June 2023, 19 transactions were completed. This was up from 18 in H1 2022, and 17 in second half of last year. This is despite an overall decline in total M&A deal volumes across all sectors in the UK during the same period.

The annual BDO Recruitment M&A H1 2023 report shows that recruitment tech deals made up 42% of all transactions across the sector in the first half of 2023. As a whole, the sector is on track to match the highs seen in 2021 when there were 40 deals, which was the highest level of activity in a decade.

Once again, the influx of private equity funding into the recruitment sector has driven deal activity in the first half of the year, accounting for nearly half (47%) of UK transactions.

James Fieldhouse, M&A Managing Director at BDO LLP, said: “Against a challenging backdrop, M&A within the UK recruitment market has held firm during 2023, demonstrating the resilience of the sector. This strong performance also bucks the trend of the overall UK deal market, which has seen a slight decline in deal volumes as macro-economic influences have impacted overall activity.

“One stand out aspect from these figures is the record levels of private equity investment in the recruitment sector. This shows a sustained appetite from private equity, as investors continue to deploy capital into the sector. This includes a focus during the period on bolt-on M&A activity, where investment has supported portfolio companies to drive inorganic growth, providing further scale, access to new territories, or access to new service lines.”

There were a number of standout deals in the first half of the year, including Taskmaster Resources sale to IPE Ventures, Mercia Asset Management’s acquisition of Privigo Limited, BGF-backed Operam Education’s acquisition of Bridge Education and Training Ltd, and the acquisition of Security Watchdog by Matrix SCM, which is backed by Bridgepoint Development Capital.

The BDO report highlighted a clear focus on the move towards technology within the sector. However, there has also been interest in the healthcare and transport and logistics sectors, where well documented labour shortages continue to drive deal activity, whilst other sub-sectors experiencing increased attention in the period include energy, education and engineering.

Fieldhouse added: “Looking ahead, there are threats to the recruitment market that are looming. The weak performance of the economy is starting to affect recruitment levels, which have been cushioned for some time by high demand shown in a high vacancy rate, coupled with low levels of unemployment.

“Although the effects of skills and labour shortages are still being felt, the tougher conditions are finally meaning the jobs market is starting to cool, with pay growth easing, vacancy numbers dropping, and redundancies rising.”

This was posted in Bdaily's Members' News section by Ian Jones .