Q1 2023 Overview
The North American staffing M&A market opened 2023 with 33 announced transactions — a 15% decline from Q1 2022 — as the broader global M&A environment contracted dramatically. Global deal volume fell nearly 50% year-over-year in Q1 driven by rising interest rates, persistent inflation, fears of recession, and extraordinary volatility following the failure of Silicon Valley Bank and the related regional banking sector concerns.
Despite the headwinds, the lower middle market — businesses with revenues under $100 million — proved notably resilient. The absence of significant large-scale transactions in the quarter reflects the dynamics at the top of the market, where boards and executives exercise greater caution approving large deals under uncertain conditions. Smaller transactions, by contrast, remained functional: buyer appetite for quality founder-led staffing businesses continued throughout Q1.
Private equity remained active relative to its historical participation rate: eight of the 33 transactions involved PE-backed buyers, including one new platform investment and seven add-on acquisitions. IT staffing and consulting was the leading segment with seven transactions, followed by other professional staffing with eleven — a broad category spanning engineering, finance, legal, and compliance staffing. Light industrial and commercial contributed six deals.
Momentum Advisory Partners completed its first transaction of 2023 in Q1, advising ProTask on its sale to INSPYR Solutions — a national IT staffing and technology solutions provider backed by A&M Capital Partners. The transaction reinforced the consistent message from our active buy-side relationships: demand for high-quality, founder-led businesses with strong client relationships and technical specialization remains robust even in a challenging macro environment.
“Lower middle-market staffing transactions — businesses with revenues under $100 million — have been somewhat insulated from the noise we hear in the broader financial markets. The same cannot be said about larger transactions, as there wasn’t a significant deal announced in the quarter.”
Akash Taneja, Founder & Managing Partner, Momentum Advisory PartnersSector Highlights
Other professional staffing led Q1 with eleven transactions — the highest of any segment — spanning engineering, finance, legal support, environmental services, and compliance consulting. IT staffing and consulting contributed seven deals, reflecting the continued demand for specialized technology talent even as broader hiring softened. Light industrial and commercial staffing added six transactions. Healthcare staffing recorded three deals, a modest showing that foreshadowed its near-complete absence in Q2. Executive search and direct-hire contributed four transactions. The breadth of the other professional category — its eleven deals spanning multiple verticals — reflects how acquisitive buyers are casting a wide net for specialized, defensible niches.
Notable Transactions
Momentum Advisory Partners advised ProTask on its sale to INSPYR Solutions — the firm’s first completed transaction of 2023. ProTask, a Washington D.C.-based provider of technical staffing and consulting services across financial services, healthcare IT, and telecommunications, was acquired by INSPYR Solutions as part of its aggressive geographic expansion strategy in the Mid-Atlantic region. The deal underscored buyer appetite for quality IT staffing businesses with deep client relationships, even in a challenging financing environment. Talent Group acquired Queen Consulting Group, a nationally recognized IT staffing firm specializing in Epic EMR implementations and healthcare IT — a sign of strategic consolidation in the healthcare IT segment. Waud Capital Partners backed Fusion Healthcare Staffing in a platform investment in travel nursing and allied health staffing, signaling continued PE conviction in the structural shortage of clinical talent.
What This Means for Staffing Founders
- Lower middle-market is the active zone. The dynamics at the top of the market — where boards require higher conviction before approving large acquisitions — do not govern the lower middle market. Founder-led staffing businesses with revenues between $10M and $50M are transacting at a healthy pace. If you’re in that range, the market is open.
- Quality gap is widening. Buyers are increasingly vocal about the difficulty of finding high-quality acquisition targets with sustainable earnings, committed management teams, and low customer concentration. COVID-inflated financials have made many businesses appear less attractive on closer inspection. Well-run firms with clean books and durable performance stand out sharply.
- PE is writing platform checks even in downturns. Waud Capital’s platform investment in Fusion Healthcare Staffing in Q1 — despite the challenging macro — confirms that financial sponsors are still entering the space. PE platforms are built over cycles, not quarters, and the sponsors with dry powder are actively looking.
- IT and healthcare specialization commands attention. Seven IT staffing transactions in Q1 — led by the ProTask deal — and PE investment in healthcare staffing confirm that buyers will compete aggressively for specialized firms in these two sectors. If your firm has a defined niche in IT consulting, healthcare IT, or clinical staffing, you have a deep and motivated buyer pool.