RG Corporate Finance remains highly active across the UK Mergers & Acquisitions (M&A) market, particularly in key sectors including, technology, human capital, manufacturing and engineering, healthcare and professional services.
In his latest column, RGCF partner and head of corporate finance Carl Swansbury focuses on the human capital sector and how it reflects wider economic activity.
The UK M&A market is experiencing somewhat of a boom, with activity at the highest level since 2008. Deal volumes were 40% higher in 2021 compared with 2020, and there is no sign of a slowdown. Of course, some slowdown is expected in due course, as some of this activity reflects pent-up demand being released following the pandemic.
The human capital sector, which incorporates recruitment, training and skills-based businesses is no exception with the UK human capital sector seeing its strongest volume of M&A transactions in more than 10 years, according to various market analysis, up over 10% in 2021 compared with 2020. The sector is a great barometer of broader economic activity and health, so the current level of deal activity, on the back of a strongly performing sector, should be viewed very positively.
UK recruitment businesses continue to be attractive places for investment for both private investors and trade buyers. Overseas trade buyers continue to view the highly developed UK Human Capital sector as very attractive, notwithstanding any concerns following Brexit.
Most deals are either sales to trade, sales to private equity or sales to management in debt backed MBOs. There has been some Enterprise Ownership Trust activity, but it is not common as the sector does not necessarily represent a great fit for this type of deal.
RGCF’s deal activity in the human capital sector reflects the buoyancy in the market, both in and out of the North East, with recent transactions including the MBOs of Nigel Wright Group and Energize Recruitment Group, HW Global’s acquisition of Osmii and the sale of Instep UK Ltd to Scale Up Capital.
Particularly active sub sectors include technology software platforms and Ed Tech businesses in a world where online and remote working has become the norm. IT and healthcare recruitment specialists have seen lots of activity for obvious reasons, but there have been increases across the board including engineering, construction and industrial.
Disruption caused by the economic slowdown following the pandemic, led to an 18% decline in employment placement revenues to circa £13.4bn in 2020. However, by the end of 2021 they had recovered to £16.8bn, above pre-pandemic levels.
Government support has helped protect the economy and mitigated the negative impact of the pandemic. A period of economic recovery is leading to higher levels of business confidence and a swift recovery in job vacancies across multiple sectors, with the recruitment sector benefitting from the increased demand in placement opportunities as well as being a big beneficiary of wage inflation.
The outlook continues to be positive, with recruitment industry revenue expected to continue its strong recovery, forecasting revenues of £21bn+ within the next five years, a growth rate of circa 6% p.a, which is likely to result in there continuing to be a lot of M&A
