Deal activity in the recruitment sector for 2022 is off to strong start with 23 deals completed in Q1, according to new analysis from Grant Thornton UK LLP’s biannual recruitment sector report.

This is compared to 18 deals completed in Q4 2021 and represents the sector’s strongest quarter since Q4 2020.

With job vacancies approaching 1.3 million (according to latest ONS data), investors have backed new growth areas and focussed on specialisms against the backdrop of record job vacancies.

 

The skills gap

“Across all sectors, one of the biggest constraints for business growth is a lack of suitable talent. The underlying drivers of this, an ageing workforce and skills shortage in growth areas such as ESG and tech, are not going away,” highlights Head of Corporate Finance at Grant Thornton UK LLP, Keely Woodley.

“There are opportunities for recruitment companies that can expand into training or learning and development, solving the supply problem and creating an end-to-end service for their clients,” adds Ms Woodley.

 

Which sector has accounted for the most M&A activity?

One of the biggest trends over the last six months is the increased M&A activity in the financial and professional services sub-sector, with it now accounting for 21 percent of M&A activity, as opposed to 7 percent in the six months prior to October.

For example, Soho Square has acquired of a minority stake in global recruitment firm, Oliver James, who are specialists in technology, accounting and finance, and engineering.  The deal will fund international expansion and further investment in its proprietary technology.

Sector specialists accounted for 59 percent of UK recruitment M&A activity over the last two quarters. Digital, IT & Technology remained the favourite, have accounted for 29 percent of sector-specific deals, compared to 15 percent in the six months prior.

 

What role has the pandemic played?

This is due to a focus on digital transformation that was accelerated by the pandemic. 

“Deal volumes in the recruitment sector have remained robust since our last update in October 2021.  The pandemic has meant that business leaders have had to accelerate the pace of change in their organisations to remain efficient and productive in a hybrid world of work. Talent that drives this change is in short supply and investors want to place a ‘bet’ on those sectors where skills are in high demand but short supply to benefit from those underlying fundamentals,” adds Ms Woodley.