Recruitment sector M&A arrives at tipping point - City Comment
29 August 2013
With increasing corporate earnings being reported across the recruitment sector and 2013 M&A deal volumes up 32% to date on 2012, we are now at an important stage of recovery: namely where confidence and earnings begin to be self-perpetuating and sustaining.
Thu, 29 Aug 2013 | Tim Evans, managing director, Boxington Corporate FinanceWith increasing corporate earnings being reported across the recruitment sector and 2013 M&A deal volumes up 32% to date on 2012, we are now at an important stage of recovery: namely where confidence and earnings begin to be self-perpetuating and sustaining.
This ‘tipping point’ is supported by our conversations with C-suite decision-makers in the sector internationally who are increasingly reactivating acquisition programmes.
The majority of these acquisition programmes are driven by the need to extend geographic or sector coverage. They are supported by ring-fenced acquisition cash accumulated during the recent years of risk aversion.
Two notable recent cross-border M&A deals include US-based Pinstripe merging UK firm Ochre House and Recruit Co of Japan buying NuGrid Consulting, one of India’s largest recruitment and executive search firms. This is good news for owners interested in an exit.
However, owners also face the challenge of there being a significantly greater number of sellers than buyers, an imbalance that will remain for the long term. Gaining a competitive advantage over other vendors will be key to exit success. This will be achieved through preparation for sale, involving a close understanding and focus on what will be valued by buyers; through intelligent exit timing; and through superior access to buyers, domestically and – ever more importantly – internationally.
M&A valuations remain highest on deals where the strategic rationales are strong, particularly on cross-border or sector specialist acquisitions. We expect valuations to strengthen as the recovery progresses beyond the current ‘tipping point’, but not to return to the bubble prices of 2004-08.
This ‘tipping point’ is supported by our conversations with C-suite decision-makers in the sector internationally who are increasingly reactivating acquisition programmes.
The majority of these acquisition programmes are driven by the need to extend geographic or sector coverage. They are supported by ring-fenced acquisition cash accumulated during the recent years of risk aversion.
Two notable recent cross-border M&A deals include US-based Pinstripe merging UK firm Ochre House and Recruit Co of Japan buying NuGrid Consulting, one of India’s largest recruitment and executive search firms. This is good news for owners interested in an exit.
However, owners also face the challenge of there being a significantly greater number of sellers than buyers, an imbalance that will remain for the long term. Gaining a competitive advantage over other vendors will be key to exit success. This will be achieved through preparation for sale, involving a close understanding and focus on what will be valued by buyers; through intelligent exit timing; and through superior access to buyers, domestically and – ever more importantly – internationally.
M&A valuations remain highest on deals where the strategic rationales are strong, particularly on cross-border or sector specialist acquisitions. We expect valuations to strengthen as the recovery progresses beyond the current ‘tipping point’, but not to return to the bubble prices of 2004-08.
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