ABOUT M&A IN RECRUITMENT

The recruitment industry has experienced a recent increase in M&A activity, in particular over the last twelve months. The industry has seen some of the highest deal numbers in recent months, SMEs and large corporations alike.

ABOUT M&A IN RECRUITMENT

Latest developments

An increased desire from both buyers and sellers to complete deals, along with a better economy, were factors in this growth. Ultimately a transaction is entered into by two parties: the buyer is able to finance a deal and the seller intends to pass their company on. The improved economy now means that buyers are better financed and as a result have more confidence in making acquisitions, and they are able to commit to the true value of a target company.

This increased confidence has a domino effect with more buyers prepared to pay a reasonable price for acquisitions; the owners looking to sell are more willing to do so as they feel the sale is worthwhile.

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MARKET DRIVERS

Entrepreneurial relief (ER)

With the re-election of a Conservative government—and one without the backing of the Lib Dems—we expect to see the continuance of ER at its current level for at least the next five years. Margaret Hodge, the Labour chair of the parliamentary Public Accounts Committee, had made comments in regards to a change in ER, potentially scrapping it altogether, which of course will not now come to fruition.

Recession

The recession is over and fears of a double dip were dispelled in 2010. GDP exceeded its pre-recession peak by Q3 2013 so many companies which were suffering now have a solid three years of accounts. A large number of M&A deals are based on the previous three years EBITDA figures and so, with offer values increasing, the frequency of completed deals has risen accordingly.

Buying power

Recruitment Mergers are seeing more and more companies begin to look at acquisitions for the first time as a result of increased performance, healthier balance sheets and retained cash. If financially viable, acquisition is a brilliant alternative to recruitment when looking to secure new business and this has seen a flourish of buyers coming to the market adding in excess of one hundred and fifty to our registered list in 2014.

Recruitment growth

Industry turnover increased 9.7% to £31.5bn in 2014/15. More than 100,000 people now work in the recruitment industry. The positive economic outlook has now seen the average annual sales per perm consultant reach £96,000.