More recruitment M&As reflects a boost in confidence

Jo Faragher

Recruitment has always been one of the most lively sectors for mergers and buy-outs. It’s an industry where it’s fairly easy for ambitious consultants and hungry business owners to strike out on their own or acquire the expertise of another company.

As with many other sectors, though, merger activity was much quieter over the past few years of recession, bar where agencies were consolidating by taking over competitors.

It’s positive news, then, that almost half of agencies are now considering an acquisition over the next few years, according to business advisory and accountancy firm BDO.

At the same time, just over 40% thought that their business would be likely to be sold or go through another exit strategy over the next five years, further fuelling movement in the market for recruitment businesses.

Agencies cite their reasons for merging with or buying another company as a means to support their growth plans, but there are additional benefits. With skills shortages looming large in many areas, buying up more consultants or potential clients can be a great route into a new market where candidates are in high demand.

Around two-thirds of agencies are already seeing growth in existing markets, adds BDO, and so want to be able to fulfill more demands from clients by bolstering their numbers and expertise.

All this potential M&A activity certainly reflects one thing: confidence that the employment market will continue to flourish with staffing experts’ services still being in demand.

Caution will be needed, though, with many more recruitment businesses coming onto the market for sale. Investors and agency owners will become ruthless in their due diligence – does this business live up to its claims? Can it really deliver return on investment?

If you’re one of these agencies looking to acquire or be acquired in the coming months and years – it’s time to get your house in order.