As BDO launches its ‘M&A Review’ of the recruitment industry in 2019, James Fieldhouse told Recruiter that he expected several signs indicating a pick-up in the sector that followed the election of Boris Johnson’s government at the end of 2019 to be followed by a higher number of deals in the coming year.

The review showed an end-of-year recovery in BDO’s Recruitment FTSE Index that tracks the share prices of companies such as Hays and Robert Walters, as well as a surge in the average Enterprise value (EV)/earnings before interest, tax and depreciation multiple (EBITDA) from a low point of less than 7 to more than 9 at the end of 2019.

“We saw a marked increase in the BDO Recruitment Index and EV/EBITDA multiples following the election, so that 2019 closed on an upward trend. Considering the amount of PE (private equity) dry powder, and the fact that the global number of deals in the sector rose in 2019, showing the recruitment sector remains attractive, I expect that a return to more certainty in 2020 should spark more UK deal activity.”

Among the other key points from the BDO review were:

• The number of global M&A deals completed in 2019 rose by 17% to 108
• The US saw the highest number of deals – 41 compared to 17 in 2018
• The number of UK deals declined from its six-year high of 32 in 2018 to 25, with activity in engineering, construction, and industrial sectors a reflection of sentiment around Brexit
• Recruitment software and platforms accounted for 23% of all deals
• The UK accounted for 15% of all transactions in the technology space
• PE involvement continued to decline from its exceptionally high levels in 2007, and is now at its lowest point for eight years
• The recruitment market grew at a compound annual rate of 7.4% over the five years to the start of 2020 to reach £13.9bn, although growth decelerated in 2019 to 5.5%
• Interest in the sector from non-recruitment firms eg. Samsic Group’s acquisition of Sellick Partnership

Fieldhouse concludes: “The recruitment sector remains closely aligned to the direction of travel of the wider economy at any point in time, making it an exciting sector to work in.”

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