In 2021, the UK recruitment market boomed as the nation’s economy recovered from the Coronavirus pandemic. Fast forward to 2022, and the market has continued to go from strength to strength, leading to unprecedented levels of M&A activity in the human capital space. RGCF’s latest human capital M&A review reveals that more than 60 disclosed transactions have been completed in the 2022 year to date, and the award-winning firm is proud to have advised on a number of these transactions.
As the firm entered 2022, RGCF was delighted to announce the successful completion of three recruitment sector transactions in short order. January saw the firm complete two transactions, the first being HW Global’s acquisition of London based development, cloud, and digital recruitment specialist, Osmii. RGCF then advised Gi Group on its successful acquisition of The Leadership Factory, a Scotland Based training business, which has allowed the group to increase revenues through diversification of its core services.
In February, RGCF advised the management team of Nigel Wright Group on their purchase of all the outstanding equity from its institutional investors, Baird to gain 100% control of the company in a MBO funded by Thincats. A few months later, RGCF announced the successful sale of a controlling stake in legal and company secretarial staffing specialist, DMJ Recruitment Ltd to Fortes Group, a London based multi-disciplinary professional services staffing group backed by PE house, Omni Partners LLP.
When announcing the sale of DMJ Recruitment, Adam Tindale, Corporate Finance Executive at RGCF said: “It is incredibly rewarding to see the successful coming together of two professional, like-minded businesses as they take the next step in their respective growth journeys. DMJ’s partnership with Fortes will bolster its position in the professional services staffing market and I look forward to seeing the group scale over the coming years”.
Fortes’ acquisition of DMJ is a great example of PE investor appetite to invest in or acquire fast-growing UK recruitment companies that have strong management teams, are placing talent into candidate or skill short markets, and have clear growth plans. From recent conversations with PE firms, acquisitive businesses, and influential individuals in the recruitment sector, RGCF believes that M&A activity in the human capital sector will remain buoyant throughout the remainder of 2022 and beyond, despite the current economic challenges that have been exacerbated by the war in Europe and the cost of living crisis.
Whilst these macro-economic challenges are at play and the UK braces itself for an economic contraction in the short term, large domestic and global recruitment firms, as well as institutional investors, who have benefitted from a strong market over recent years, are continuing to seek growth through strategic acquisitions and investments in the sector. The debt market is no exception, having evidenced a significant level of liquidity from the number of debt funded MBOs completed over recent months, including the MBO of Nigel Wright (funded by Thincats), the MBO of Energize (funded by Caple), and the MBO of ClearEdge, all of which RGCF advised on.
Despite the aforementioned strong performance of recruitment businesses in 2022, these macro-economic challenges have caused the share price of listed businesses to fall, which may explain why many of the M&A transactions that have completed in the year to date have involved non-listed or PE backed trade buyers, as evidenced by Gi Group’s acquisition of The Leadership Factory and Fortes group’s acquisition of DMJ, to name a few.
In conjunction with the mentioned external factors, there are also several internal factors that are positively impacting the saleability of SMEs operating in the recruitment market. These include not only the significantly improved revenues being produced by SMEs amid unprecedented demand caused by skill and talent shortages, but also as a result of these businesses de-risking through the diversification of revenues, broadening of customer bases, internationalisation and strengthening of management teams.
As these external and internal factors align, RGCF believes that the remainder of 2022 and beyond will continue to be a time of significant opportunity for well-positioned staffing businesses to capitalise on the ongoing demand for M&A activity in the human capital space, as firms continue to play a crucial role in the UK economy, helping businesses recruit and retain the talent and skills required to grow and perform.
If you are a business owner considering a corporate transaction, whether it be a company acquision, sale or MBO, RGCF would be delighted to provide strategic advice to help you maximise value and achieve your mid to long term goals. Should you wish to set up an initial, confidential conversation, please contact CF executive, Adam Tindale, email: adamtindale@ryecroftlenton.com.
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