UK recruitment M&A 2025: Strong activity in a resilient market

2025 is an uncertain time for recruitment companies. Rising employment costs, digital disruption from technologies such as AI and renewed economic turmoil amid the uncertainty over President Trump’s tariff policies have all hit recruitment companies, as well as the wider UK jobs market.

Despite these headwinds, M&A activity in the recruitment sector has remained solid, registering strong growth last year thanks to rising deal appetite among strategic trade buyers, a surge of inbound activity and continuing interest from private equity and venture capital investors in the more high-growth, specialised areas of the industry.

Forecasts for 2025 have largely been optimistic, suggesting that, while headwinds will remain significant, dealmaking activity should continue to grow. Early figures suggest that these predictions are being borne out, with deal volume in Q1 2025 comfortably outstripping the 2024’s quarterly average.

However, significant issues remain in the sector, particularly for smaller and medium-sized recruiters. In addition to economic pressures, there are other factors – including mounting interest from wealthy overseas buyers and sluggish company valuations – that could put UK companies at a disadvantage in the current dealmaking environment.

Perhaps the most salient question at the mid-point of 2025 is how well UK recruitment company owners can profit from the current M&A market, either as buyers or sellers.

Activity in 2024
From an M&A perspective, 2024 was a year of strong recovery in the recruitment sector. According to BDO’s 2024 review, there were 104 deals completed in the sector last year, a 49 per cent increase on 2023.

A number of external factors contributed to this rebound. These ranged from stronger M&A appetite and investor confidence as economic uncertainty eased, to a broader uptick in dealmaking ahead of changes to Capital Gains Tax. According to BDO, anticipated changes to CGT rates drove a significant increase in activity, with October 2024 seeing 38 deals – in comparison to 23 in October 2023.

On a sector-specific level, dealmaking was largely driven by trade buyers and private equity platform companies seeking to expand their market share through consolidation. Private equity and venture capital buyers, meanwhile, sought to tap into high-growth specialisms like software recruitment and emerging technologies such as AI, whilst US buyers continued to use M&A to establish footholds and bolster their presence in the UK.

BDO highlighted Executive Search as a particularly active sub-sector for dealmaking, with 17 deals completed – 16 per cent of the year’s total.

Elsewhere, a study from RSM UK highlighted the appeal of niche verticals such as healthcare, technology and professional services, as well as the appeal of recruitment companies “offering differentiated services such as consulting, Statement of Work (SOW) models, or Recruitment Process Outsourcing (RPO), alongside traditional staffing solutions”.

Another notable trend highlighted by RSM was increased interest in “diversified, multi-sector recruitment firms” that offer services across a range of sectors. As an example, the report cites Bluestones Group’s acquisition of Dynamite Recruitment, which offers recruitment across the retail, commercial, financial and technical sectors. According to RSM research, acquisitions of multi-service recruitment accounted for 16 per cent of the total for 2024, with acquirers attracted by the "lower investment risks” these companies can offer during periods of economic uncertainty.

Overall, the story of recruitment M&A in 2024 was one of resilience, a testament to what RSM labelled as “the diversity and adaptability” of the sector. Niche, specialised and diversified firms continued to attract attention from a range of buyer types, UK recruitment companies began to realise the value of growing and strengthening their business through M&A, while the strength, variety and expertise of UK recruitment firms attracted growing numbers of overseas investors.

Despite the sector's resilience and significant strengths, it is also important to acknowledge that 2024 was also a very difficult year for many recruitment firms from a trading perspective, amid ongoing economic uncertainty and rising costs.

According to BDO’s report, insolvency levels in the sector were 40 per cent higher in 2024 than they were in 2022. The scale of this increase over a two-year period highlights that, while the overall UK economy may have improved over the past year or so, companies that are struggling remain at considerable risk of entering significant financial distress and even falling into insolvency.

What’s motivating different buyer types?
One of the most notable features of M&A activity in the recruitment sector is the wide range of buyer types and deal types that have been prominent over recent years. Trade buyers, private equity firms and platform companies, venture capital investors and overseas buyers have all undertaken significant activity in the UK market, while alternative succession options, such as employee ownership trusts and management buyouts, have also proven popular.

Of course, there are a broad range of general motivations that are spurring such diverse activity. For one, the UK recruitment sector is highly fragmented, with a significant number of niche firms and micro businesses operating across a hugely varied mix of specialisms and verticals. There are, naturally, some major national players in the industry, but the top firms continue to represent a relatively small portion of the overall market. The logical effect of this is that there is no shortage of potential acquisition targets for trade or private investors seeking to grow through M&A.

The sector is also resilient and in high demand. While it has been hit with numerous issues over recent years and the current jobs market appears to be weakening, recruitment firms have, in general, responded well to these challenges and, consequently, it has remained an attractive sector for M&A buyers.

On a more granular level, however, the motivations for different buyers and different buyer types can, of course, range widely.

Trade buyers remain on top
While there is significant coverage of the role private equity plays in M&A across professional services industries, trade buyers have emerged as the dominant force in the recruitment sector over recent years.

BDO’s 2023 report found that trade buyers were the most active buyer class during the year, accounting for 57 per cent of the deal total. In 2024, this increased further, with trade buyers responsible for 62 per cent of all activity.

For recruitment companies, acquisitive growth is a quick, direct and efficient method of either expanding their geographic presence or of growing their business into adjacent or entirely new areas of the recruitment market.

This may be particularly appealing given the challenges that recruitment companies face, with a weaker jobs market and overall economic uncertainty potentially meaning that many are finding it extremely difficult to secure organic growth.

Taking advantage of the sector’s fragmentation can enable companies to expand quickly, grow and diversify their revenue streams, bolster their profitability and, ultimately, build greater resilience into their business, increase their market share and mark themselves out from their competitors.

ORB Recruitment is a leading multi-sector recruitment agency based in Doncaster, providing recruitment solutions to a UK-wide client base spanning key industries including construction, engineering, manufacturing and healthcare.

In October 2024, the company announced the acquisition of construction and civil engineering recruitment specialist CLS Construction Labour Solutions (UK) Infrastructure in a deal that significantly strengthened its position in the construction recruitment market.

Normanton-based CLS has more than 25 years of experience serving the construction and civils sectors, with a database of more than 50,000 active contractors and numerous strong relationships with Tier 1 contractors across the UK.

The deal forms part of ORB’s growth plan as it seeks to grow its permanent recruitment capabilities, strengthen its market standing in key sectors and expand its service offering for its UK clients.

ORB Recruitment CEO Stewart Olsen said that the acquisition of CLS presented an opportunity for the firm to expand its construction industry footprint, saying that CLS’s "excellent reputation and deep industry knowledge” complemented ORB’s strengths.

Olsen added that the combination of the two companies would provide greater value to clients and candidates in the construction industry.

Following the acquisition, CLS will continue to operate under its own brand name, while benefitting from ORB’s financial backing and resources. ORB plans to invest in the company’s growth and intends to increase its staff headcount.

RSM UK's 2024 study found that trade buyers accounted for 33 deals last year (52 per cent of the total) up from 27 deals in 2022 (47 per cent of the total). This increase and the prominence of trade deals was largely driven by UK trade buyers seeking inorganic growth strategies to boost their market share.

Another factor, according to BDO, is that such deals have become the preferred exit route for many owners in the sector. BDO states that this is often “the quickest exit route for the individuals involved.”

Another factor in vendors favouring trade deals may be concerns (that have proven significant in other sectors) about the impact that private equity takeovers can have on companies – potentially putting a brand, workforce of client relationships at risk of disruption. This is a factor that has often been cited in the growing popularity of EOT and MBO succession plans.

Tech and niche recruiters attract private equity
While trade buyers appear to be firmly established as the leading operators in the recruitment M&A market, this is by no means to suggest that private investors – such as private equity and venture capital firms – are inactive.

Private equity and venture capital continue to be drawn to the sector, which is unsurprising given the fragmentation of the market, the resilient demand for recruitment services and the massive scope to grow through consolidation.

In Recruiter’s 2024 HOT 100 list of the top 100 UK recruitment companies, close to a quarter (23) were private equity backed. This was up from just 14 in the previous year’s list, indicating that PE firms are increasingly turning to the highest performing companies in the sector.

Such private equity-owned recruitment companies are also prominent buyers, with RSM finding that secondary transactions (add-on deals completed by PE-backed trade companies) accounted for 42 per cent of all private equity deals – compared to 26 per cent the previous year.

As well as indicating the growing role that private equity-backed buyers are playing in the consolidation of the sector, it also potentially demonstrates a lingering degree of caution among private equity firms as economic uncertainty remains prevalent.

The increase in private equity-backed deals reflects caution in primary PE investments (acquisitions made directly by private equity firms), which dropped from 17 in 2023 to 14 last year.

A similar trend was apparent in the BDO report, where it was found that, although the volume of private equity and venture capital deals had increased from 2023, as a percentage of the total they had declined from 34 per cent to 29 per cent, with PE firms instead targeting bolt-on platform deals.

However, as highlighted by BDO Deal Advisory Partner James Fieldhouse, PE and VC buyers continue to be attracted to a number of key features that define the recruitment sector.

These “fundamental core value drivers”, as Fieldhouse calls them, include, experienced management teams, scalable business models, growing end-user markets, diverse revenue streams, cash generative businesses, visible earnings and, crucially, well-established specialisms.

Many of the most active areas for dealmaking in the recruitment sector last year involved specialist companies that focused on recruitment for one specific industry. Deals for Executive Search companies (firms that place candidates into leadership positions) more than tripled from 2023 to 2024, while there was a similar increase in deals for recruiters in the Engineering/Construction/Industrial space.

CorpAcq, a private investor that backs UK SMEs and has a portfolio of more than 40 companies, announced earlier this year that it had acquired Manchester-based financial recruitment consultancy Axon Moore.

Axon Moore specialises in supporting businesses to recruit C-suite leaders and build dynamic leadership teams. The company has been experiencing strong financial performance, amid rising demand from businesses seeking the best executive talent to accelerate their growth.

The deal comes after CorpAcq secured funding from private equity firm TDR Capital to support its M&A strategy. The acquisition of Axon Moore aligns with its long-term strategy of partnering with established companies with solid management teams and demonstrably strong financial performance.

Axon Moore becomes the second recruitment firm in CorpAcq’s portfolio, joining personnel, contractor management and outsourced payroll services provider Strategic Resources.

Following the takeover, Axon Moore’s leadership team, including founder David Moore and Managing Director Mark Turley, will remain in place, with CorpAcq’s backing providing access to expertise and resources to help drive further growth.

Calling the deal a “major milestone” for Axon Moore, David Moore said that the company has " a deep understanding of the pressures that high-growth businesses are under, and the pace and commitment they need from their partners.”

He added that this focus has enabled the business to "build a strong foundation of partnerships with some of the most successful businesses across the country” and CorpAcq’s knowledge and expertise would help drive the next stage of its growth journey.

Private equity and venture capital buyers are heavily focused on such specialist areas and trends. Perhaps most notably in the Recruitment Platform/Software space. This sub-sector is highly tech-enabled, with the use of tools such as AI becoming increasingly prominent in the recruitment process.

Recruitment Platform/Software deals accounted for close to a quarter of 2024’s total volume, with 56 per cent of these deals involving private equity or venture capital firms in some way.

While direct investments are still prominent, though, there seems to be little question that the emerging trend is for bolt-on acquisitions by platform companies. James Fieldhouse describes PE-backed buyers as “becoming increasingly prevalent and ramping up competitive tension in the bid to build out their service offering, scale quickly and capture synergies.”

As a result, this is a trend that seems likely to continue – particularly if economic uncertainty remains a pressing concern that puts private equity and venture capital firms off direct acquisitions – with PE-backed platform companies potentially rivalling trade buyers over coming years.

Cezanne HR is a London-based provider of HR and payroll software for growing businesses both in the UK and internationally. The company’s software helps clients to automate and streamline their HR and payroll processes, generate insights, improve employee engagement and cut data administration.

In 2023, the company secured investment from mid-market private equity firm NorthEdge. In March 2025, NorthEdge supported Cezanne on its first strategic acquisition in a wider growth plan, with the company swooping for Dublin-based recruitment technology business Occupop.

Occupop provides end-to-end digital solutions aimed at helping businesses to attract, manage and retain talent. The company has developed a strong reputation for its innovative and sophisticated platform.

Following the acquisition, its technology will be integrated into the Cezanne platform, providing an enhanced offering for clients of both firms, while supporting Cezanne’s expansion into the Irish market.

Cezanne CEO Simon Noble said that the combination of the two companies was “hugely powerful [...] particularly as customers continue to focus on platforms that provide a comprehensive and high quality suite of HR solutions.”
NorthEdge Director Dan Matkin added: “Occupop enhances the Cezanne offering through bringing additional product, people and scale – all key components of the value creation plan.”

Overseas buyers still eyeing UK assets
This is a trend that has become extremely prominent across so many sectors in recent years: well-capitalised overseas buyers (often from the US) targeting low-value, high-quality UK businesses in high-growth sectors, often using these deals to begin major expansion plans in the UK or as a launchpad into the adjacent EU market.

Before chaos around import tariffs began to dominate questions of global trade, this was also an especially notable feature of M&A in the recruitment sector. According to BDO, overseas investment into the UK recruitment industry last year saw 16 deals involving international buyers, a 78 per cent increase compared to 9 deals in 2023.

Unsurprisingly, US buyers were the dominant force as they continue to seek investments in the UK market, motivated by the sector’s strong fundamentals and growth potential and aided by highly favourable exchange rates.
According to RSM’s figures, meanwhile, more than a quarter of deals in the sector last year (28 per cent) involved overseas buyers, with over half these (56 per cent) being made by US buyers.

This made up for a drop-off in activity involving European buyers, who completed just four deals last year compared to nine in 2023 (per RSM). Unlike US buyers, European-based firms have been heavily impacted by many of the same economic challenges as UK firms: high interest rates, slow growth and stubborn inflation.

As these challenges continue to be present, and the turmoil surrounding US economic policy has added another layer of uncertainty to international trade, it seems doubtful that international buyers will become noticeably more active during 2025.

However, should economic conditions ease and some sense of certainty return to global markets, there seems little doubt that the underlying popularity of UK recruitment assets would continue to attract growing numbers of overseas buyers.

What challenges are UK firms facing?
While the UK recruitment M&A market remains resilient, it is clear that recruitment companies face a raft of challenges. Perhaps the most pressing recent issue has been the tough trading conditions the sector has faced.

According to RSM, “many experienced professionals in the sector [consider] the last two years to be among the toughest they’ve seen in terms of trading conditions”, with sector headwinds combining with broader economic challenges.

This has resulted in a significant increase in insolvency rates in the sector over the previous two years. RSM reports that 2024 saw "an element of more financially distressed transactions”, as well as strategic divestments by both large and small firms seeking to “de-risk, refocus and reinvest cash in their core offerings during a period of change and funding constraints.”

While the UK’s economy has improved somewhat compared to the downturn seen during 2022 and 2023, there remains significant uncertainty that will continue to impact the UK recruitment industry.

Many companies will face higher costs as a result of rising Employer National Insurance contributions, as well as a lower threshold for contributions and a higher minimum wage, while there have also been widespread concerns about the impact this has had on hiring activity, potentially significantly affecting revenue for many recruiters.

These measures took effect in early 2025 and have led many employers to scale back hiring or plan redundancies, especially in cost-sensitive sectors like retail, hospitality, and transport. Pressures have put a significant squeeze on recruitment companies seeking to grow in the wake of the COVID-19 pandemic and economic downturn and these challenges appear set to continue into 2025.

According to recent analysis, the UK jobs market has continued to weaken during the first half of 2025, which has been widely attributed to rising costs. In April, job vacancies fell to their lowest level in almost four years, suggesting both weakening demand for workers and rising unemployment.

As well as impacting the ability of recruitment companies to grow organically, it could also hit those seeking either to exit or to grow through acquisitions. RSM writes: “The conditions faced by the UK recruitment market to rebuild and grow EBITDA to the levels required to achieve exit goals in 2025 remain challenging for many and were not helped by the National Insurance increases announced in the October budget.”

The difficulties faced by UK recruitment companies looking to sell in the current market are reflected by persistently sluggish valuations. According to BDO’s 2024 report, average EV/EBITDA multiples in the sector last year stood at 6.6x, down slightly from 6.9x in 2023 and significantly below the kind of levels seen prior to the economic downturn.

BDO reported that: “Multiples of the tracked recruitment companies have been quite stagnant in recent years and for 2024 ranged between 5.5x and 7.8x. This is considerably lower than the 14.0x we saw in Jan-22.”

Of course, this is a significant attraction for overseas buyers benefitting from favourable exchange rates and EBITDA multiple arbitrage across geo markets. However, it could also mean that many owners eyeing the exit door will find it difficult to sell at a strong valuation.

For trade buyers, meanwhile, the challenges the sector is facing could raise questions about how well they will be able to compete with wealthier rivals, particularly if private equity firms continue to focus their investments on bolt-on deals.

For now, trade buyers remain the most active in the market and (especially with many owners seeking easy, direct and safe succession options) they are unlikely to run out of attractive acquisition targets any time soon. However, it would not be surprising if they began to face more intense competition for the best targets over the coming years.

2025 so far and what’s next?
Broadly speaking, predictions for 2025 were that the sector would continue to see increasing M&A activity and, so far, this seems to be bearing out. In an insight on activity during Q1 2025, RSM reported that there were 21 deals in the sector involving UK assets during the first quarter – up from an average of 15 deals per quarter in 2024.

The report generally shows a continuation of the same trends seen during 2024, with trade buyers still the preferred exit route. However, the margin by which trade deals outstripped PE deals has shrunk considerably – with trade deals accounting for 48 per cent and PE deals accounting for 43 per cent.

While it is unwise to draw concrete conclusions from results for a single quarter, this is a trend worth watching to see if private equity continues to close the gap on trade buyers. Again, as in 2024, bolt-on deals accounted for a significant majority of private equity-linked deals.

Overall, the report demonstrates that interest in the sector remains strong as a result of its resilience in the face of headwinds and the attractiveness of core value drivers such as specialist recruitment verticals.

That being said, there are significant headwinds that could have an impact on activity, with RSM, for example, mentioning the as-yet-unclear impact of US tariffs on the deal market, as well as the economic challenges that UK companies face.

However, with recruitment companies seemingly alert to the many upsides of acquisitive growth, private equity and venture capital firms keen to tap into high-growth areas of the market and ongoing fragmentation, the recruitment sector appears set for strong, continuing M&A activity throughout 2025 and beyond.

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