Recruitment M&A: key themes for 2013 - City comment
28 February 2013
A quiet period in the quoted recruitment company reporting calendar provides a natural break to take stock of the current health of the recruitment M&A market.
Thu, 28 Feb 2013 | Mark Kingston, senior executive Boxington Corporate FinanceA quiet period in the quoted recruitment company reporting calendar provides a natural break to take stock of the current health of the recruitment M&A market.
Since the start of Q4 2012, over 50 M&A deals (with a total disclosed value of $1.1bn [£730m]) have been completed worldwide in the recruitment sector. This volume of deals represents roughly a 25% increase on the same period one year ago.
Some interesting themes emerge from these recent transactions.
1. Recruiters with significant cash reserves are slowly and finally regaining the confidence to use these funds for M&A. Pressure from institutional shareholders on management teams to deploy cash (either through M&A or by dividend/stock repurchase programmes) is also ratcheting up. Australian recruiter Chandler Macleod’s A$37m (£35m) acquisition of Vivir Healthcare and Group Crit’s series of US deals are examples of this pressure at work
2. Deal appetite among Far East recruiters, particularly Japanese firms such as Recruit, Temp Group and Intelligence, is strong for international mid-market and large cap acquisitions in order to serve their domestic clients internationally
3. Recruiters, especially executive search firms, are using M&A to move into related services such as talent management and leadership development, examples including Korn/Ferry International’s $80m acquisition of PDI Ninth and Heidrick & Struggles’ $68m acquisition of Senn Delaney
4. Despite low volumes, trade deal valuations remain robust, reflecting the above average strategic nature of many of the acquisitions
With a couple of exceptions, we note that UK recruiters have not been particularly active recent buyers, partly explained by heavyweight UK recruiters such as SThree and Michael Page (and to some extent Hays and Impellam in recent years) favouring organic growth over M&A.
We expect a slow and gradual uptick in global recruitment M&A volumes during 2013 with international cross-border deals continuing to feature prominently.
Since the start of Q4 2012, over 50 M&A deals (with a total disclosed value of $1.1bn [£730m]) have been completed worldwide in the recruitment sector. This volume of deals represents roughly a 25% increase on the same period one year ago.
Some interesting themes emerge from these recent transactions.
1. Recruiters with significant cash reserves are slowly and finally regaining the confidence to use these funds for M&A. Pressure from institutional shareholders on management teams to deploy cash (either through M&A or by dividend/stock repurchase programmes) is also ratcheting up. Australian recruiter Chandler Macleod’s A$37m (£35m) acquisition of Vivir Healthcare and Group Crit’s series of US deals are examples of this pressure at work
2. Deal appetite among Far East recruiters, particularly Japanese firms such as Recruit, Temp Group and Intelligence, is strong for international mid-market and large cap acquisitions in order to serve their domestic clients internationally
3. Recruiters, especially executive search firms, are using M&A to move into related services such as talent management and leadership development, examples including Korn/Ferry International’s $80m acquisition of PDI Ninth and Heidrick & Struggles’ $68m acquisition of Senn Delaney
4. Despite low volumes, trade deal valuations remain robust, reflecting the above average strategic nature of many of the acquisitions
With a couple of exceptions, we note that UK recruiters have not been particularly active recent buyers, partly explained by heavyweight UK recruiters such as SThree and Michael Page (and to some extent Hays and Impellam in recent years) favouring organic growth over M&A.
We expect a slow and gradual uptick in global recruitment M&A volumes during 2013 with international cross-border deals continuing to feature prominently.
