Released today [27 February 2024] exclusively to Recruiter, the ‘2024 Recruitment M&A Annual Report’ reveals that the number of deals in 2023 fell by 28% from 2022, the fall occurring against a backdrop of “tough economic conditions”. 

Key trends in the recruitment M&A deals market during 2023 included:

• A growing number of bi-lateral deals – BDO said there had been a growing number of ‘off market’ deals, involving two parties in direct negotiations without testing the wider buyer audience. 
• Bank of England base rate movement – A number of incremental base rate increases have occurred to counter “a crippling inflation” over the course of 2023. BDO said cost of debt and lenders’ appetites had affected “all deal types”, but private equity in particular.
• Disposal activity from listed businesses in 2023 – Examples cited included Capita and Impellam. The former sold its resourcing businesses Capita Resourcing, HR Solutions and ThirtyThree to Inspirit Capital; Impellam disposed of its regional staffing businesses and healthcare staffing business Medacs Global Group to Twenty20 Capital.
• Increased amount of accelerated M&A (AMA) activity – “We have noted an uptick in the number of distressed deals in the market, where an AMA is undertaken to save the business from administration, liquidation or some form of restructuring process,” BDO commented.

However, in what BDO M&A partner James Fieldhouse described as “a flurry of larger transactions”, HeadFirst Group’s offer to acquire Impellam Group for a reported £483.2m and Gi Group completing its €130m (£111.25m) acquisition of Kelly Services’ European staffing business is starting 2024 off on a positive note. This suggests “an early indication that the market is starting to return”, BDO said.

Other highlights from the 32-page report:

• The recruitment market performed in line with UK GDP (gross domestic product) in 2023, generating £17.9bn, but is forecast to outperform, growing to £26bn by 2030.
• Annual compound growth (CAGR) of 5.4% is forecast over the next seven years, compared to a UK GDP four-year CAGR of 1.4% to 2027.
• Average Enterprise Multiple/Earnings before interest, taxes, depreciation and amortisation (EV/EBITDA) in 2023 grew in the year to 6.9x.
• Sustained investment activity with private equity accounting for 34% of all deals.

The full report will be released tomorrow [28 February] and will be available online.

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