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Merger & Acquisition activity
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ANZ Recruitment industry merger and acquisition activity in 2020 has fallen from its very strong levels and is likely to see a substantial rebound in the coming year, according to HHMC Global's Richard Hayward.
This year there have been more buyers in the market than sellers. Deals have been done, but we have encountered a number of misconceptions. Some buyers expected there to be acquisition bargains in the market, but few recruitment agency owners had to sell “no matter what the circumstances”.
Most recruitment leaders have taken the actions needed to protect their business this year and are anticipating revenue and profit growth in 2021. And we should not forget that 2020 has still been positive for a percentage of recruitment agencies.
The transactions that have happened tended to be struck at EBITDA multiples similar to those of previous years, however, transaction structures often reflected the uncertainty of forecasts and hence were weighted more on reducing buyer risk.
2021 will be interesting. We believe equity transactions will increase in volume as the year continues, but patience may be required from both buyers and sellers. There are so many variations in the market now that will take time to be resolved and to settle – it continues to be difficult to predict how any recruitment agency in any sector or geography is performing. Many agencies have not been able to forecast business performance with certainty, and forecasting is a precursor to the confidence required to make forward decisions such as growth, restructuring, funding and equity transactions.
The international market will also have changes from previous years.
Each country is dealing with 2020 in different ways and continuing international travel restrictions dampen global business activity. However, as business travel between countries starts to re-open, there are also new opportunities for the recruitment industry, such as Australia’s pending Free Trade Agreement with the UK. Australia and New Zealand will continue to be a positive investment target for the recruitment industry.
HHMC Global firmly believes that recruitment agency owners can be confident that in 2021 strong buyer demand will continue. Valuations should hold. Deal structures are likely to benefit all parties by being reliant on forward performance in a growing market.
Owners looking to take advantage of this positive market do need to prepare well. Successful sales processes do not happen without appropriate preparation of the business and its operation.
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