The UK recruitment sector is currently experiencing significant interest in the field of recruitment technology, driven by the continuous advancements of AI and digitisation in the business world.
A recent report on mergers and acquisitions (M&A) in the industry reveals that rec-tech deals made up 42% of the total recruitment deal activity in the first half of 2023. This marks a noticeable increase in the presence of recruitment platforms in deal negotiations, as well as a surge in transactions involving technology-enabled software, spanning from background checks and verifications to psychometric assessments and talent screening. These findings are part of the latest report from BDO, providing insights into the state of M&A within the UK’s recruitment industry.
Interestingly, the report highlights a significant upswing in energy-related transactions during this period, with a focus on traditional energy sources like subsea drilling and oil & gas exploration.
Several key takeaways from the report include:
– The UK recruitment market has demonstrated resilience, with deal levels maintaining their momentum, showing a slight increase in activity during the first six months of 2023 compared to the previous two half-year periods. This growth was second only to the second half of 2021.
– Private equity (PE) played a pivotal role in 47% of UK deals during the first half of 2023, a notable increase from the 40% seen in 2022. This strong PE involvement in recruitment businesses outpaces the 20-30% average seen in UK deals across all sectors. PE influence extends to various sub=sectors within the recruitment market, including recruitment technology, transport & logistics and healthcare. Some notable examples include Taskmaster Resources acquired by IPE Ventures and Security Watchdog by Matrix SCM with backing from Bridgepoint Development Capital. Additionally, Aliter Capital invested in Concept Resourcing.
– Although there was a 7% decline in overseas investment in the UK recruitment market compared to 2022, overseas investors – mainly from the US – remain active players in the UK recruitment landscape.
Despite its resilience, James Fieldhouse, M&A Managing Director for BDO, cautions that the recruitment market faces potential challenges ahead. The overall performance of the economy has started to impact recruitment levels, as the high demand previously supported by a high vacancy rate and low unemployment begins to wane.
Some larger listed recruiters have recently reported drops in overall fees, raising questions about the potential impact on deal activity in the latter half of 2023. However, historical experience suggests that this sector will likely remain resilient, continuing to contribute success stories to the broader deal markets.
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