12th August 2020

COVID-19 unlikely to impact recruitment sector M&A trends

Recruitment

UK recruitment a strong market for investment

The highly entrepreneurial nature of the recruitment sector means there is seldom a dull moment for wheelers and dealers. Mergers and Acquisitions activity, with all the associated legal, due diligence and poker-faced sang-froid, certainly tends to liven things up and creates a little excitement.
Recent history has given cause for optimism. From 2018 to 2019 global deals have increased by 17%. However, the six year market high, which ranked the UK as No.1 in deal levels, has come to an end, with the US now in the top spot.
Despite this, the UK remains an attractive market for investment. With a strong focus on technology investment in the sector, last year, transactions related to recruitment software and platforms accounted for 23% of all deals.

The COVID-19 effect

Ultimately, in the current climate, recruitment business owners are likely to have more than a passing interest in what their agencies may be worth.
For some, especially when it comes to determining the value of a business for M&A purposes, the impact of COVID-19, may be something of an elephant in the room, that no one wants to talk about.
This stems, of course, from the fact that the levels of uncertainty are exerting downward pressure on valuations and what buyers may want to pay. Let’s face it, who in their right mind wants to sell in a declining market if they don’t have to?!
However, the sector is resilient and any suggestion that there is going to be significant long term damage to the value of recruitment businesses is likely to be incorrect.
Q1, 2020 was promising, similar to 2019 in terms of deal making. However, there was a crash as COVID-19 hit. One market weathervane, the BDO Recruitment FTSE Index, fell by over 40% at the end of March 2020.
This was mirrored with the number of deals in Q1 + Q2 2020 being only half of the volume seen in the same period of 2019. The BDO 2020 Mid-year Recruitment Market snapshot and  2020 Annual Recruitment Market review help to shed further light on what’s been happening.

Maximise the M&A value of your recruitment agency with ETZ

Although volumes may be down, recent historic trends are set to continue. Private Equity interest in the sector is still strong, and there is continued interest and demand in tech-enabled recruitment solutions.
The reason for this simple: Tech-enabled recruitment businesses are more efficient. ETZ strengthens your business and puts in a position to maximise its value when it comes to M&A valuation.
Whether it is for sale or merger, or consolidation or to exit the market, ETZ provides the opportunity to streamline the back-office and root out inefficiency. To see how ETZ transforms efficiency, simply call us on 0800 311 2266 to book a demo.



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