Q1 2022 - M&A Overview
Following a very active year for M&A activity in the Staffing and Workforce Solutions Industry in 2021, the first quarter 2022 showed no signs of slowing down. Momentum Advisory Partners noted 39 announced transactions in the first three months of the year. That’s down slightly from the same period in 2021, a record year for M&A in the space.
Founder and Managing Partner of Momentum Advisory Partners, Akash Taneja said, “In our many regular discussions with buyers of staffing and solutions businesses, the appetite for acquisitions remains extremely high. There’s an incredible amount of money that’s still sitting on the sidelines just waiting to be deployed from both Strategic and Private Equity buyers. I cannot recall a time in my 15-years covering this space that buyers were this aggressively looking for acquisition targets. It’s certainly been a seller’s market. We remain very encouraged by the current sentiment and expect the market will remain active in the near term.”
Although optimism from market participants remains high (see our M&A Buyer Survey from January 2022), potential economic headwinds cannot be ignored. A very tight labor market, rising inflation and interest rates, and Russia/Ukraine are all reasons buyers are likely to be cautious in where they choose to invest.
Private Equity continues to make significant investments in the space. Of the 39 announced transactions in Q1, there were seven platforms and eight add-on acquisitions. In the context of Private Equity, a platform acquisition refers to the initial acquisition a Private Equity group makes to enter an industry with the intent to then “add on” or acquire other smaller companies in that industry. Platform acquisitions are typically larger companies, with at least $5 million in EBITDA, whereas “add-on” acquisitions can be much smaller.
Of note, there were nine transactions of Executive Search firms in Q1 2022 compared to just three in the same period a year prior. Executive Search has benefited from the tighter labor market, which may be the cause for the uptick in activity. Not surprisingly, IT was also at the top of the list, also with nine announced transactions, followed by Healthcare and Light-Industrial/Commercial.