The COVID-19 pandemic disrupted staffing industry M&A activity significantly in 2020, with reported transactions declining nearly 20% in the first half of the year. However, strategic acquirers—particularly those focused on defensive, essential-service staffing sectors—continued to close deals and position for long-term growth, signaling that the pandemic was a disruption, not a halt, to industry consolidation.

What Was the State of Staffing M&A Before the Pandemic?

Merger and acquisition activity in the staffing and workforce solutions industry in 2020 began with much of the same positive momentum that characterized 2019, a year in which the industry saw nearly 150 reported transactions. More than 10 years after the Great Recession ended, M&A activity in the staffing industry was still on the upswing.

Then in March 2020, the environment changed dramatically due to the novel coronavirus that led to an ensuing global pandemic.

How Severely Did COVID-19 Impact Staffing M&A Activity?

The contraction in the economy and volatility in the markets undoubtedly influenced the pace and volume of many businesses in the staffing industry to varying degrees. Staffing Industry Analysts projected a nearly 20% decline in revenues for the industry as a whole in 2020. Although some segments in most professional areas performed relatively well during the pandemic, many were severely affected.

According to Duff & Phelps’ report, “Staffing Industry Insights – Summer 2020,” there were only 20 reported transactions in Q2 2020, down from 38 in Q1, for a total of 58 reported transactions in the first half of the year. That represented a decline of nearly 20% from the first half of 2019.

IT staffing led the way with 22 of the 58 total transactions reported in H1 2020. Light industrial staffing and healthcare staffing followed with 10 and seven transactions respectively.

Were Buyers Still Actively Pursuing Acquisitions?

Despite the difficult first half of 2020, activity and enthusiasm began to pick up as companies adapted to the evolving post-coronavirus reality. Leaders of staffing organizations across the country confirmed they were on the hunt for acquisition opportunities across all segments and verticals.

To gain deeper insight into how active acquirers were navigating the pandemic environment, I spoke with Elie Azar, founder and CEO of private equity firm White Wolf Capital LLC. My relationship with Elie goes back to 2011 when he founded the firm after spending 11 years at Cerberus Capital Management and Ernst & Young.

Elie and White Wolf have been among the most active M&A participants in the staffing and services industry, having completed three platform acquisitions (Consulting Solutions, NSC Technologies, and THD) and 12 add-on acquisitions to these platforms since 2016.

Interview: Elie Azar on Staffing M&A During COVID-19

How have your three platform businesses within the staffing industry fared since the pandemic ramped up in March? White Wolf’s staffing portfolio is pretty well diversified—how have those companies been affected?
We’ve been very fortunate that while business has been somewhat impacted, our staffing businesses have generally fared just fine. The businesses we go after are mostly defensive in nature and essential, with a lot of focus on the defense or infrastructure industries.
White Wolf has been a very active M&A participant in the staffing industry. How has the pandemic changed, if at all, your acquisition strategy for the balance of 2020?
As buy and build investors, our plan was, and continues to be, to look for both new platforms as well as add-on opportunities. So far this year, we have closed a total of four new add-on acquisitions. Three for a manufacturing platform company and one for our staffing platform, NSC Technologies, which we just completed in June. We are currently working on closing another four new companies over the next few weeks: one new services platform and three new manufacturing add-ons.
In any of the deals completed during this pandemic, was there any change to terms or structure? Did the pandemic present an opportunity to re-trade valuations to the downside?
The businesses we go after are mostly defensive in nature and essential. While business has been somewhat impacted, they have generally fared well. So, we didn’t have any situation that needed to be paused till performance improved or where a major change in valuation was needed. We look at situations on a case-by-case basis. In some situations, the pandemic has exposed areas of weakness that were covered up during the good times but for the most part we are understanding and adjust for any covid impact (e.g., EBITDAC).
Author’s note: Staffing companies are valued on a multiple of EBITDA. The “C” in EBITDAC is an adjustment for Covid-19 that gained traction during the pandemic. Essentially, it’s a way to back out the negative effects of the pandemic on financial results.
In general, have you viewed the pandemic as an opportunity?
Definitely not. This pandemic has been so disruptive, wreaking havoc on businesses, communities and families. Besides, credit markets have tightened significantly so any benefit of increased deal flow is offset by tighter credit conditions.
In the current environment, what are you looking for in a potential acquisition target? What characteristics are most important?
Assuming that the numbers make sense, the most important thing we look for is cultural fit. We love to partner with growth-oriented, motivated management teams that are more interested in that second ‘bite of the apple.’ We obviously understand ownership and management’s desire to take ‘chips’ off the table and diversify their holdings—and we are happy to facilitate that, but we prefer situations where strong motivated leadership is looking to re-invest/roll into the new partnership and together embark on an aggressive growth strategy. While there are no guarantees, the objective is to make their rolled portion at exit become more valuable than the value of the entire business at entry.
Author’s note: Re-investing and “rolling into” the new partnership means the buyer would like the seller to retain some portion of the total transaction consideration in equity ownership of “Newco.” When the PE firm exits its investment, the seller participates in the upside—their second “bite of the apple.” This is a very common deal structure in private equity transactions.
Has activity picked up since the start of the pandemic? Are you seeing more opportunities?
Yes—we are definitely seeing a meaningful uptick in the number of deals that come across our desk versus the prior year.
How has the inability to meet face-to-face affected your process?
I personally prefer the face-to-face management dinners and meetings but we have adapted. That said, things are working out just fine with using platforms like Zoom and Microsoft Teams. We have been and continue to be very active this year and have closed all our deals this year via virtual meetings.

What Were the Key Takeaways for Staffing M&A in 2020?

The conversation with Elie was very insightful and confirmed the belief that M&A activity in the staffing industry was poised to rebound. Acquirers who were strategically determined to pursue opportunities during this unprecedented economic environment were the ones most able to prevail as economic activity rebounded.

What Should Staffing Companies Focus on During Uncertain Times?

Whether considering a potential exit or not, every staffing organization should prioritize the following during periods of economic uncertainty:

  1. Focus on your customers. Now, more than ever, is a crucial time to reach out and find out what is keeping them up at night. What challenges are they facing and what solutions can you provide? Don’t rely on assumptions. Make sure you are continuing to provide the high level of service they are accustomed to.
  2. Reach out to your contingent workforce. These individuals are the lifeblood of the staffing industry. Find out what concerns they have around safety, security, and continued employment. They are looking to you for answers during uncertain times.
  3. Communicate with your teams. With new challenges affecting your employees—including adjustments related to working from home, support services, and the safety of those returning to the office—leaders need to be present and connected to their staff. Communicate clearly and frequently about where your organization is heading.
Historical Context

M&A activity in the staffing industry subsequently rebounded sharply in 2021, with over 170 transactions completed—up from 115 in 2020. The rebound was fueled by pent-up pandemic-induced demand, strong industry performance across most sectors, a backlog of delayed deals from 2020, and continued favorable monetary policy.

Frequently Asked Questions

How much did COVID-19 reduce staffing M&A activity in 2020?

Staffing industry M&A activity declined nearly 20% in the first half of 2020 compared to the same period in 2019. According to Duff & Phelps, there were 58 reported transactions in H1 2020. IT staffing led with 22 transactions, followed by light industrial (10) and healthcare (7).

Did private equity firms stop acquiring staffing companies during the pandemic?

No. Active PE firms like White Wolf Capital continued closing deals. White Wolf completed four add-on acquisitions in H1 2020 alone, including one for their staffing platform NSC Technologies. While some deals paused, strategic acquirers with defensive portfolios remained active throughout.

What is EBITDAC and why was it used during the pandemic?

EBITDAC stands for Earnings Before Interest, Taxes, Depreciation, Amortization, and COVID-19. It was a pandemic-era adjustment used to normalize financial results by backing out the negative effects of COVID-19 on earnings, providing a clearer picture of pre-pandemic profitability for valuation purposes.

Did buyers renegotiate deal valuations downward during the pandemic?

Not necessarily. Buyers evaluated situations on a case-by-case basis. Companies with defensive, essential-services business models that fared well during the pandemic did not experience major valuation adjustments. However, the pandemic did expose weaknesses in some businesses that had been masked during stronger economic times.

How did virtual meetings change the staffing M&A deal process?

M&A participants adapted to platforms like Zoom and Microsoft Teams for management meetings, due diligence, and deal closings. While most buyers preferred face-to-face meetings pre-pandemic, deals were successfully completed entirely through virtual meetings, accelerating broader adoption of remote deal execution in the industry.