Tue, 21 Feb 2023 | BUSINESS NEWS
Accountancy and advisory firm BDO has said that the UK recruitment sector remains a “hive of activity” for M&A, despite a drop in deal volume last year. There were 35 M&A deals in the industry last year involving a UK business, down from 40 in 2021, but this was 33 per cent higher than the average seen in 2019-2020.
BDO’s annual M&A Review: Recruitment highlighted a number of M&A trends in the sector, including the popularity of multi-sector “generalist” agencies (which comprised 26 per cent of target companies – a 50 per cent increase from 2021) and the recruitment platform/software market (which accounted for 11 deals, close to a third of the year’s total).
2022 saw ongoing interest in the sector from private equity firms, with private equity funding involved in 39 per cent of UK deals last year. The report also highlighted global growth in recruitment M&A activity, with global deal levels up 50 per cent last year compared to 2020.
BDO LLP M&A Managing Director James Fieldhouse commented that the UK had experienced an influx of overseas buyers last year, saying: "This international activity appears to have extended to overseas acquirers and investors, who once again are viewing the UK market as a geography with a positive growth outlook, with a resulting rebound in UK targets being involved in deals with an overseas bidder during the period. As such, in 2022, 28 per cent of UK deals involved an overseas buyer – up from 8 per cent in 2021."
Despite a tumultuous few years which has seen the sector battling headwinds including COVID-19 and ongoing economic turmoil, BDO’s report showed that the UK recruitment market demonstrated “positive signs of recovery” during 2021 and the first quarter of 2022.
However, the firm added that 2022’s underwhelming economic growth and reduced forecasts for UK growth would likely lead to the recruitment sector’s growth rate being revised downwards.
Fieldhouse continued: "It's fair to say that it's been an interesting 12 months, with businesses battling several seismic macro-economic factors, ranging from a war in Ukraine, to inflation and interest rates at levels not seen before in this century, mixed in with a degree of political instability caused by a mini budget.”
"Add to this the continued threat of a recession in the UK and labour strike activity akin to the Winter of Discontent. However, despite these factors, the M&A deal markets are alive and well, with the recruitment sector yet again being a hive of activity for acquirers and investors during 2022."
"Although UK deal volumes have declined, it seems investors still view the recruitment sector as an attractive area to invest with continued strong deal volumes during 2022."
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