According to a new report on mergers & acquisitions (M&A) in the industry, rec-tech deals accounted for 42% of the UK recruitment deal activity in the first half of 2023. The increased growth in the number of recruitment platforms in the deal arena, from roughly a third of all deals previously, has been accompanied by a rise in the of transactions of technology-enabled software, including background checks and verifications to psychometric assessments and talent screening, according to BDO’s latest report on the state of M&A in the UK’s recruitment industry.

“We’ve also seen a marked rise in the quantum of energy-related transactions during the period,” BDO reported. “It’s interesting to note that the targets involved appear to be focused upon more traditional sources of energy including subsea drilling and exploration of oil & gas.”

Other highlights of the report include:

• M&A in the UK recruitment market has been “resilient, with deal levels sustained”, with deal activity in the first six months “marginally higher” than the two previously reported half-year figures and “only bettered” by the second half of 2021.
• 47% of UK deals involved private equity in the first half of 2023, compared to 40% during 2022. The level of PE interest in recruitment businesses compares strongly to its average 20-30% involvement in UK deals across all sectors. “This influence is showing across the recruitment market, with deals in subsectors including recruitment tech, transport & logistics and healthcare,” the report said. Examples of PE-fuelled deals include the acquisitions of Taskmaster Resources by IPE Ventures and Security Watchdog by Matrix SCM, backed by Bridgepoint Development Capital, as well as investment by Aliter Capital in Concept Resourcing.
• Overseas investment in the UK recruitment market has fallen by 7% to 21% from 2022, but overseas investors remain active in the UK. They are predominantly from the US.

While remaining resilient, James Fieldhouse, M&A managing director for BDO, warns that the recruitment market faces “some threats” lying ahead. “The weak performance of the economy is starting to affect recruitment levels, which had been cushioned for some time by high demand shown in a high vacancy rate coupled with a low level of unemployment.

“As the larger listed recruiters announce drops in overall fees in the last few weeks, it remains to be seen what effect this has on deal activity for the latter half of 2023,” he said. “However, experience would suggest that this sector will prove to be resilience and continue to provide success stories to the wider deal markets.”

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