Q2 2023 Overview
North American staffing M&A declined further in Q2 2023, with 27 announced transactions — down 18% from Q1 and 13% from Q2 2022. Global M&A fell 36% year-over-year in the quarter, as total transaction value dropped from $1.14 trillion in Q2 2022 to $732 billion. The staffing industry’s M&A environment reflects these broader pressures: slower job order volume, higher cost of capital, and tightening credit conditions have all contributed to a more challenging deal market than anticipated at the start of the year.
The most consistent theme from our regular conversations with active acquirers is a significantly raised threshold for acquisitions compared to the prior 12–18 months. As Christopher Moulton, VP of Corporate Development at Tandym Group, noted: the volume of quality inbound deal flow has declined noticeably relative to 2022 and prior years. Buyers are seeing businesses come to market that appear to be owners attempting to capitalize on COVID-inflated earnings — unsustainable performance that doesn’t survive scrutiny. The threshold for approval increases sharply as deal size grows.
Against this backdrop, executive search and direct-hire activity surged to nine transactions in Q2 — more than double its Q1 contribution — suggesting that the search segment, with its lower capital requirements and faster integration timelines, remains more accessible for acquirers in a tighter financing environment. IT staffing and consulting held steady with seven transactions. Healthcare contributed six deals, while light industrial and engineering each contributed two.
Momentum Advisory Partners completed its second transaction of 2023 in Q2, advising QED National — a New York City-based IT staffing and cybersecurity firm founded in 1993 — on its sale to Seneca Resources, backed by Caymus Equity. The transaction was the first acquisition by Seneca following Caymus’s majority investment in 2022, and positioned the combined entity as a stronger competitor in the IT consulting and cybersecurity space.
“The volume of larger and more importantly ‘quality’ inbound deal flow has certainly declined year-to-date relative to 2022. In many cases, we’ve seen businesses come to market that appear to be owners seeking to capitalize on what we consider to be unsustainable levels of earnings driven in large part by COVID.”
Christopher Moulton, VP of Corporate Development, Tandym GroupSector Highlights
Executive search and direct-hire led Q2 with nine transactions — up over 100% from both Q1 2023 and Q2 2022 — as the search segment’s lower capital and integration requirements made it more accessible for acquirers navigating a tighter financing environment. IT staffing and consulting contributed seven deals, down 45% from Q1’s strong showing but in line with historical quarterly norms. Healthcare staffing contributed six transactions — its strongest quarter of 2023 — including Jackson Healthcare’s acquisition of LRS Healthcare, one of the year’s more significant healthcare combinations. Light industrial and engineering each contributed two deals. Other professional staffing recorded just one transaction, its lowest contribution of the year.
Notable Transactions
Jackson Healthcare acquired LRS Healthcare — ranked 25th largest healthcare staffing firm — significantly expanding Jackson’s scale in nurse and allied health staffing and positioning the combined entity among the top 5 healthcare staffing firms nationally. Momentum Advisory Partners advised QED National on its sale to Seneca Resources, backed by Caymus Equity. QED National, founded in 1993 by Colleen Molter and run by her son Dustin, was a specialist in IT consulting and cybersecurity in the New York/Albany market — a highly strategic fit for Seneca’s technology staffing and consulting build-out. New Mountain Capital made a majority investment in Alku, a Massachusetts-based IT and life sciences staffing firm approaching $1 billion in revenue — one of the more significant PE-backed platform investments of the year in the staffing space.
What This Means for Staffing Founders
- COVID earnings are a liability, not an asset. The most common reason quality buyers are passing on deals right now is inflated financials from 2021–2022 that don’t reflect normalized business performance. Founders who can demonstrate sustainable, recurring earnings — not pandemic-era spikes — will have a materially better process and outcome than those who cannot.
- Cybersecurity staffing is a standout niche. The QED National transaction highlights how specialized positioning in cybersecurity — a sector with structural talent shortages and strong client retention — creates a distinctly motivated buyer pool. Firms with defensible niches in security, compliance, and risk technology are among the most sought-after assets in the current market.
- Search and executive recruiting is still transacting. Nine executive search and direct-hire deals in a 27-deal quarter represents a 33% share — the highest of any segment. Search firms are highly acquisitive targets due to their low capital requirements and fast integration timelines. Founders in the search and direct-hire space face less financing headwind from buyers than their contract staffing counterparts.
- The H2 setup is cautiously constructive. At the current run rate, 2023 is on pace for approximately 120 transactions for the full year — down about 10% from 2022. As economic uncertainty begins to dissipate and buyers who have been waiting for clarity start to re-engage, H2 activity has potential to improve. Founders who are ready should be preparing their materials now.