U.S. staffing industry M&A activity continued to flourish until COVID-19 related business shutdowns ramped up in mid-March. The number of completed staffing M&A transactions in the near term will no doubt be impacted, as many deal processes have now paused.
Even before the pandemic, many of the U.S. public staffing companies were absent from notable M&A activity, as staffing industry acquisition activity remains primarily driven by private equity-owned strategic buyers seeking to scale their existing platforms to create value for subsequent exits.
Strategic buyers accounted for 84% of the staffing industry acquisitions in the first quarter of 2020, with private equity funds (financial buyers) investing in new platform acquisitions accounting for the other 16% of transactions.
– Private equity acquired six new platform staffing investments in the first quarter of 2020. This follows the 65 new platform investments in the staffing industry made by private equity from 2017-2019.
Professional staffing companies (including IT, healthcare, finance/accounting and life sciences) typically see the most demand from buyers and private equity investors.
Most buyers have very specific criteria as they evaluate acquisition targets. Acquirers desire companies with a strong blend of both recurring revenue growth and profitability, with significant attention paid to customer diversification and the gross margin impact of potential acquisitions. Proven management teams desiring to stay on post-transaction also remain highly sought after.