Q1 2024 – Industry Insights Report

• North American staffing M&A transactions declined further in Q1 2024. Announced transactions totaled 20, a 26% decrease from Q4 2023 and a 40% decrease from Q1 2023.
• IT Staffing/Consulting and Light Industrial/Commercial led deal activity with four transactions each. Notably, the healthcare staffing segment recorded no transactions in Q1.
• Private equity participation remained significant: Six out of 20 announced deals involved private equity, including a “platform” acquisition by MidOcean Partners (The Re-Sourcing Group) and five “add-on” acquisitions.
• Smaller deals dominate, signaling market caution: While smaller acquisitions dominated Q1 2024 and are expected to continue throughout the year, larger deals typically signify a more robust market environment. Boards and CEOs tend to exercise greater caution when approving large transactions, making their presence a stronger indicator of returning confidence in the staffing industry’s M&A landscape.
• Outlook suggests ongoing market challenges for the next two quarters. M&A activity in the North American staffing industry is anticipated to stabilize or rebound beginning in Q4 2024.

While the latest jobs report suggests a robust overall economy, M&A activity in the staffing industry tells a different story. Q1 2024 saw a significant decline, extending a downward trend that began in 2023. This slowdown reflects both industry performance and a lack of readily available deals. Many staffing executives we spoke with at the Staffing Industry Analysts Executive Forum in March expressed a continued interest in M&A, but a cautious wait-and-see approach dominates the market. There’s a sense of uncertainty, as sellers are hoping to regain 2022 performance levels before exiting, potentially missing out on current opportunities. Meanwhile, valuation expectations diverge, creating a gap between buyers and sellers.

The strong jobs report reinforces the likelihood of the Federal Reserve maintaining its current stance on interest rates. This means higher costs of capital and tighter access to capital, directly impacting M&A activity. Deals will likely remain expensive for the foreseeable future. We expect M&A activity in the staffing industry to remain subdued for the next few quarters, with a potential leveling off or potential uptick by Q4. This is undoubtedly a complex landscape to navigate. However, we believe there are still strategic opportunities for organizations actively seeking quality M&A deals. Understanding current market dynamics is essential. Sellers aiming for pre-downturn valuations may need to reconsider their positions. Buyers must be patient yet proactive, carefully evaluating potential targets that offer long-term value and align with their strategic goals.