Recruiters at risk of takeover, report warns
30 January 2014
As the recruitment market hots up, nearly one in five staffing companies are at risk of a hostile takeover, according to a survey by industry analysts Plimsoll. John Bissell (left) of industry brokers LDA gives Recruiter his views.
Thu, 30 Jan 2014
As the recruitment market hots up, nearly one in five staffing companies are at risk of a hostile takeover, according to a survey by industry analysts Plimsoll.
The report finds that 175 of UK's 1,000 largest staffing companies are at risk of being taken over, due to the perilous financial state of their business.
John Bissell (pictured right), senior partner at LBA, a consultancy that buys and sells recruitment businesses, agrees with Plimsoll’s analysis that the recruitment industry is divided into two – “those that have piles of cash and those that don’t”.
“A lot depends on margins,” he adds, and these “have generally fallen”.
Bissell tells Recruiter: “There is a livelier market with more large companies looking to acquire businesses than at any time in the last three or four years; the market is hotting up.”
He says that because the value of multiples (the number of times a company’s market valuation exceeds its earnings) quoted by public quoted companies “probably lags behind their real value, there is quite a lot of vulnerability [to takeover]”.
Bissell explains that company valuations and multiples in the publicly quoted sector of the industry drives value and multiples in the rest of the market. “There is no direct correlation, [between the two] but there is a ripple effect,” he explains. He says that companies may see this as an opportunity to acquire other staffing businesses cheaply.
The Plimsoll report finds that 56 recruiters have seen the value of their companies decline by more than 50% in the last three years, with 102 firms seeing a decline of between 25% and 50%, and 128 a fall of 10% or less.
On the plus side, 172 companies increased their rise by more than 50%.
The report also reveals that 92 companies continue to operate at a loss, for the second year running.
And it finds that the most profitable 431 companies have an average profit margin of 4.2%.
The report finds that 175 of UK's 1,000 largest staffing companies are at risk of being taken over, due to the perilous financial state of their business.
John Bissell (pictured right), senior partner at LBA, a consultancy that buys and sells recruitment businesses, agrees with Plimsoll’s analysis that the recruitment industry is divided into two – “those that have piles of cash and those that don’t”.
“A lot depends on margins,” he adds, and these “have generally fallen”.
Bissell tells Recruiter: “There is a livelier market with more large companies looking to acquire businesses than at any time in the last three or four years; the market is hotting up.”
He says that because the value of multiples (the number of times a company’s market valuation exceeds its earnings) quoted by public quoted companies “probably lags behind their real value, there is quite a lot of vulnerability [to takeover]”.
Bissell explains that company valuations and multiples in the publicly quoted sector of the industry drives value and multiples in the rest of the market. “There is no direct correlation, [between the two] but there is a ripple effect,” he explains. He says that companies may see this as an opportunity to acquire other staffing businesses cheaply.
The Plimsoll report finds that 56 recruiters have seen the value of their companies decline by more than 50% in the last three years, with 102 firms seeing a decline of between 25% and 50%, and 128 a fall of 10% or less.
On the plus side, 172 companies increased their rise by more than 50%.
The report also reveals that 92 companies continue to operate at a loss, for the second year running.
And it finds that the most profitable 431 companies have an average profit margin of 4.2%.
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