City Comment: Carl Swansbury_2
28 March 2012
A turbulent macro-economic environment has not resulted in a reduction in the number of deals being completed in the recruitment sector. The most noticeable changes have been an increase in the need for vendors to be flexible when it comes to valuations and deal structures.
Fri, 2 Mar 2012 | By Carl Swansbury, director, Ryecroft Glenton Corporate Finance
A turbulent macro-economic environment has not resulted in a reduction in the number of deals being completed in the recruitment sector. The most noticeable changes have been an increase in the need for vendors to be flexible when it comes to valuations and deal structures.
Most purchasers are now requiring vendors to stay with the company for longer following a sale, with many insisting on a 12-24 months handover period. This has an immediate impact on succession planning, which now has to be a prominent agenda item, addressed in good time, years before an anticipated sale.Nevertheless, a solid staffing business, with substantial revenue, experienced management and a good second tier management team remains a very attractive prospect to trade purchasers, venture capital companies and private equity houses. The skill is to make sure it is presented to the right purchaser in the right manner at the right time.
Recent deals we have completed include E-Resourcing’s acquisition of Williams McKinley and Wild Recruitment’s sale to national staffing business Berry Recruitment.
The purchase of Williams McKinley was successful not only because E-Resourcing was buying a strong SAP contractor, but also because the vendor had intentionally stepped away from the business and had put in place a strong second tier team. It was therefore bought with a strong functioning management team intact.
Wild Recruitment’s sale to Berry Recruitment also underlines the importance of early planning. Many years prior to the sale, Wild Recruitment owner Kim Way provided branch manager Michelle Stewart with 10% of company shares through an EMI Share Option Scheme. This meant that at the time of sale, the purchaser had in Michelle Stewart an experienced manager and shareholder.
The outlook across the UK for valuation within the staffing sector is cautiously optimistic. PE (Price/Earnings) multiples remain healthy as long as vendors and shareholders demonstrate a degree of flexibility in valuation and deal structure.
Certain areas of staffing such as blue collar, commercial and driving are facing market challenges. However, niche areas such as IT, education, health care and technical should continue to attract keen interest from purchasers, venture capital companies and private equity houses.
Carl Swansbury, director, Ryecroft Glenton Corporate Finance
A turbulent macro-economic environment has not resulted in a reduction in the number of deals being completed in the recruitment sector. The most noticeable changes have been an increase in the need for vendors to be flexible when it comes to valuations and deal structures.
Most purchasers are now requiring vendors to stay with the company for longer following a sale, with many insisting on a 12-24 months handover period. This has an immediate impact on succession planning, which now has to be a prominent agenda item, addressed in good time, years before an anticipated sale.Nevertheless, a solid staffing business, with substantial revenue, experienced management and a good second tier management team remains a very attractive prospect to trade purchasers, venture capital companies and private equity houses. The skill is to make sure it is presented to the right purchaser in the right manner at the right time.
Recent deals we have completed include E-Resourcing’s acquisition of Williams McKinley and Wild Recruitment’s sale to national staffing business Berry Recruitment.
The purchase of Williams McKinley was successful not only because E-Resourcing was buying a strong SAP contractor, but also because the vendor had intentionally stepped away from the business and had put in place a strong second tier team. It was therefore bought with a strong functioning management team intact.
Wild Recruitment’s sale to Berry Recruitment also underlines the importance of early planning. Many years prior to the sale, Wild Recruitment owner Kim Way provided branch manager Michelle Stewart with 10% of company shares through an EMI Share Option Scheme. This meant that at the time of sale, the purchaser had in Michelle Stewart an experienced manager and shareholder.
The outlook across the UK for valuation within the staffing sector is cautiously optimistic. PE (Price/Earnings) multiples remain healthy as long as vendors and shareholders demonstrate a degree of flexibility in valuation and deal structure.
Certain areas of staffing such as blue collar, commercial and driving are facing market challenges. However, niche areas such as IT, education, health care and technical should continue to attract keen interest from purchasers, venture capital companies and private equity houses.
Carl Swansbury, director, Ryecroft Glenton Corporate Finance
