2022 Mid-year Recruitment Market snapshot

BDO’s mid-year market snapshot monitors deal activity and market conditions in the recruitment industry. Figures for the first half of 2022 show that M&A activity in the recruitment sector remained buoyant against the backdrop of a heated job market.

Coming into 2022, UK deal activity in the recruitment market had reached a 10-year high and there was a confident sentiment amongst recruitment leaders that growth would continue. Six months on and whilst there have been many factors at play, deal levels have continued apace to match levels only just below the same period of H1 in 2021. This has been driven by overseas investors sourcing fast growing UK recruitment companies with strong management teams and a continued interest from the private equity sector, to back high quality and entrepreneurial leaders of recruitment companies who have a vision for further growth.

Factors at play include the slowing but continued rise in job vacancies, whilst latest figures show the unemployment rate has fallen again since the start of the year, leading to a shortage of available labour and a heated jobs market. As such, many business-owners are keen to either seek investment and grow, or alternatively de-risk, on the back of a positive trading performance. We have also noted a rise in interest in generalist recruitment businesses; having a diverse mix of sectors in a disrupted market has proved to be a successful strategy in maintaining a sustainable level of income. 

With the macro-economic shock from the Russia/Ukraine conflict, alongside other pressures in the economy coming from high levels of inflation, a cost of living surge and, believe it or not, yet another Tory leadership contest, making predictions in this ever-changing marketplace is tough, but we are confident that staffing and recruitment companies will continue to play a vital role within a UK economy grappling with fragile consumer confidence. 

READ OUR SNAPSHOT

2022 Annual Recruitment Market Review

BDO's latest Mergers & Acquisitions review of the recruitment sector looks at deal activity and industry trends in the recruitment market in 2021. The latest report shows the recruitment sector has experienced a boom in deal activity in 2021, against a challenging backdrop of remote working, the full impact of Brexit, unwinding of the furlough scheme and the Great Resignation.

In our report, alongside a full review of 2021 global and UK deal activity we cover:

  • Current thinking about human capital – our regular survey of c-suite management of medium-sixed UK businesses reveals insights around businesses’ relationships with their employees, and concerns around recruitment
  • Will your furlough claims come back to haunt you? HMRC are cracking down on fraudulent or error-based claims and we outline how you can limit your risk
  • Attracting and motivating the workforce – offering the right mix of pay, rewards and benefits to attract the right candidates and to maintain a motivated workforce has become more complicated. We explore the science behind how pay and reward affect employee outcomes
  • The ESG agenda – why is an ESG strategy important and what does each of the E, S and G elements mean for the recruitment industry?

What are the recruitment mergers and acquisitions (M&A) activity headlines?

  • Overall deal activity in the UK increased by 42% in 2021 compared with 2020 levels. The recruitment market followed this trend with 40 deals, up from 21 in 2021 and surpassing a previous 10 year high of 36 deals in 2018
  • In a world which has quickly adapted to an increasingly online and remote working environment, unsurprisingly recruitment platforms/ software have continued to attract investment as well as IT and healthcare. There has also been a notable uptick in activity amongst recruitment agencies in traditional industries such as engineering, construction and industrial
  • Selling to a trade acquirer or bringing on board a Private Equity investor continue to be the most common forms of divestment for recruitment owners
  • It’s also pleasing to report that despite the adversity and potential global barriers caused by the global pandemic and Brexit, the UK remains a country of interest for overseas acquirers and investors.

What is in the immediate future for the recruitment industry?

2021 exceeded all expectations and we observe a general sense of optimism from recruitment agency owners and management teams that growth looks set to continue. With the majority of sectors in the UK now recovering and/or showing signs of further growth, we hope the M&A environment will continue to thrive in 2022. However a cautious approach is wise, as we note some external events and factors which might come into play to de-rail this activity in future months - including recent downgrading of recruitment stocks and IMF reducing UK growth prospects.

To get the full picture of what is happening in the recruitment market and a full analysis of deal activity:

READ OUR FULL 2022 REPORT

If you would like to discuss any of the content in this report or any other business related issue, please do get in touch. For further recruitment and professionals services insights and reports, please visit our Professional Services hub.

Previous M&A annual reports and market snapshots for the recruitment sector:

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