For the majority of 2022, deal activity largely mirrored pre-Pandemic levels and remained healthy in Recruitment & Staffing, however we did experience a notable tailing off towards the end of Q4. Nonetheless, we continued to remain optimistic for 2023 at Connect, with the robustness of the sector evident in deals seen Jan-March. Take a read below of our Q1 round-up for the key deals and trends we saw throughout the quarter:
Q1 - Executive Search & Professional Services
Q1 saw a number of UK deals completed in professional services and executive search. One of the notable deals was Three Hills Capital Partners’ (THCP) backing of Kernel Global. This transaction involved the exit of previous PE partner, Literacy Capital, who had gone on an impressive growth journey with the group since 2018, boasting a strong 9.8x ROI with internal headcount growing from 50 to 300 during the hold period.
Kernel Global comprises two key brands, one of which is Dartmouth Partners: a permanent agency placing candidates in corporate finance, private equity, wealth management and legal sectors. The other brand includes its executive search arm, Pure Search, with expertise in Tax & Treasury, Legal, CFO, Audit, and Risk & Compliance. With professional services recruitment representing an addressable market of c.£8 billion globally, Kernel serves the mid-tier segment and THCP’s investment provides substantial opportunity to further consolidate this space. The partnership is set to facilitate further acquisitions into the Kernel platform, enabled by THCP’s track-record of supporting M&A within the businesses it partners with.
Heidrick & Struggles’ completion of Business4Zero demonstrated another deal for Q1 in the executive search & professional services space. Chicago headquartered, this transaction suggests the UK continued to remain attractive in Q1 for overseas buyers. Additionally, it also reflects evolving trends in the labour market, with executives placing more emphasis on purpose and culture as a priority for moving jobs. H&S’ completion of Business4Zero is synonymous with this wider shift as the business is a next generation consultancy, specialising in recruitment solutions which develop and implement purpose-driven change. Through this acquisition, Heidrick & Struggles intends to bolster its existing set of leadership advisory services, enabling clients to make successful business transformations by linking purpose and strategy to leadership and culture.
Q1 – Global Healthcare & Life Sciences
Q1 mirrored much of the positive trajectories we saw in 2022 for activity in the Healthcare and Life Science sectors. There were a couple of deals worth highlighting which demonstrate sizeable interest in the Australian market. For instance, UK headquartered, Acacium Group, continued to strengthen its foothold in Australia through the acquisition of Sanctuary Recruitment. Headquartered in Sydney and specialising in aged care recruitment, the addition of Sanctuary Recruitment to Acacium’s portfolio, demonstrates a positive move in the group’s strategy to become a leading global healthcare delivery partner. The integration will facilitate Australia-wide coverage to candidates and clients alike. It marks another step in Acacium’s aggressive non-organic growth plans, completing on 4 transactions in the last 2 years.
UK interest in Australia did not stop there, with NES Fircroft completing on a deal with Evolve Scientific Recruitment. With a significant presence in the Life Sciences market already, Evolve’s local expertise is expected to strengthen NESF’s position as the partner of choice for Scientific & Technical employment solutions across the APAC region. In order to expand its growing capabilities in the APAC, NESF have reported that Evolve will retain its brand and there will be no immediate changes to operations in limiting disruption to clients and contractors.
There was also significant activity for Healthcare recruitment closer to home, with House of HR continuing its ambitious plans to dominate the European staffing market. February saw two Healthcare acquisitions, the first of which was one of the largest players in the Netherlands, TMI, generating €97.7million in 2021. Second came another sizeable deal in Germany, with the acquisition of Pluss enabling the group to become one of the biggest healthcare HR providers in the country. With the recent acquisition generating €157million in turnover, the Group is expected to become one of the market-leading providers in the DACH region in the next few years.
In contrast, Impellam Group announced plans to dispose of its healthcare staffing business, Medacs Global Group, to Twenty20 Capital (a European specialist investment fund focussed on the human capital services sector.) This transaction closed in pursuit of a new expansion strategy, with Impellam Group wishing to focus on key growth markets and verticals geared towards delivering higher margins and return on capital. As CEO Julia Robertson states ‘the company is now a digitally enabled and collaborative workforce solutions and specialist recruitment group dedicated to Managed Services and STEM which represented 70% of the group's 2022 revenues.’
Q1 – Light Industrial
Impellam Group’s sale of Medacs Global completed among several transactions in Q1, with the business also disposing of the other regional staffing agencies in the group. One of which was Blue Arrow, its light industrial division, placing personnel in the office/admin, transport/logistics, hospitality, and manufacturing sectors. Blue Arrow is considered one of the UK’s best known high-street staffing brands, having been founded in 1959 and comprising 65 high-street branches nationwide. The transaction, which included the other businesses (Medacs Global Group, Tate, Chadwick Nott, Career Teachers) completed on a debt-free cash consideration of £85million. The Blue Arrow deal continued much of the trends we saw last year with many agencies adopting a strategic divesture of their light industrial divisions to pursue new growth strategies which focus on higher margin/white collar business segments.
Light industrial activity also featured in several other deals for Q1, with IPE Ventures completing on Leeds headquartered, Taskmaster Resources. Operating as the private equity arm of the IPE Group, capital funding has been committed post-integration by IPE ventures to facilitate the further growth of the business. Post-acquisition, Taskmaster is expected to continue running independently under Managing Director, Andrew Skorupka.
There was also notable deal activity amongst strategics in this space, with BeNext’s subsidiary, Gap Personnel Group, acquiring a 60% stake in Absolute Solutions Group. The partnership is expected to accelerate both firms’ growth plans by utilising each other’s technologies and infrastructure to better serve clients in expanding reach across the UK recruitment market.
Deal volume in light industrial recruitment was not just limited to the UK market, with Hastings Equity Partners announcing its third Fund V investment into US based, TERRA Staffing Group. Operating for several decades, TERRA Staffing Group is considered one of the largest privately held staffing firms in the US, now trading from 18 offices in 5 states. Specialising in industrial, administrative, and technical staffing, TERRA is well positioned to capitalise on the global labour shortage trend, utilising its technology driven solutions to assist companies with difficult-to-fill jobs that often strain HR departments.
Q1 – Tech-enabled Platforms
Tech-enabled staffing platforms also contributed to Q1 deal volumes, with this type of agency gaining considerable traction. As reported by the SIA, annual revenue for these platforms is up by 58% to $21 billion globally (2022). These new platforms are said to represent nearly 4% of the overall global temporary staffing market in 2022, where prior to 2020 they represented less than 1%. The sizeable growth experienced by agencies such as JobandTalent, with technologies to streamline traditional recruitment practise, has increased the visibility for these on-demand staffing marketplaces.
Naturally, this has filtered through to the M&A market, making tech-enabled agencies more attractive as an acquisition opportunity and we saw this in several deals for Q1. For instance, BGF invested £12million into Tribepad, a leading talent acquisition software provider. Since inception in 2008, the company has developed the platform to automate the end-to-end hiring process, with the software used by in-house talent acquisition teams at blue-chip companies such as Tesco, the BBC, Grant Thornton, Subway, and the NHS.
We also saw nGAGE close on a deal with Ryalto, the tech-enabled platform specialising in workforce communications and engagement via a flexible shift booking system. With a focus on user experience, Ryalto offers a ‘social media style’ mobile app and has serviced many blue-chip clients in the healthcare sector in the last three years. The acquisition is reported to further develop nGAGE’s HR Tech offering, whilst better serving the needs of its customers to manage a disparately located workforce. Meanwhile, for app users they are provided with more flexibility to manage their work lives via an app. This provides an automated client / user interface for a more seamless process, making these recruitment businesses more attractive in the wider M&A landscape.