Q1 2026 Overview
Q1 2026 produced 35 announced transactions in North American staffing M&A — the strongest opening quarter in at least three years and, candidly, more activity than we anticipated entering the year.
However, volume alone does not describe the market we’re currently in. Q1 seems to be following a pattern that has defined this cycle since 2023: headline numbers that look encouraging sitting atop underlying dynamics that remain difficult.
The conversations Momentum has been having with founders reflect what we described in our Q4 2025 report — owners who have spent two or three years waiting for a turnaround that has not arrived, accepting that a return to 2021 and 2022 valuations is not coming, and choosing to transact now on terms the market will bear. Some founders whose businesses are performing well have also begun exploring a sale, citing concern about long-term AI disruption to the staffing model. We believe that concern is largely premature — the industry’s prolonged contraction has been primarily a demand story, not an automation story — but the sentiment is real and is contributing to seller supply at the margins.
Buyers, meanwhile, remain among the most selective we have observed. Diligence timelines have extended. Earnouts and deferred consideration have become standard for anything that does not meet a narrow set of criteria. Quality deal flow — the kind that generates multiple credible bids and strong pricing — continues to be scarce. The businesses getting done share a consistent profile: durable client relationships built through the downturn, specialization in hard-to-fill roles, stable gross margins, and a client base diversified enough to withstand demand variability in any single vertical.
“Staffing M&A in Q1 2026 is moving — just not the way some owners expected. Having sat on both sides of these transactions as a CEO and now advising owners and PE-backed platforms through the process, what I’m seeing is strategic buyers shopping with real intention: capability and specialization over pure revenue, with a cautious lens on how AI may impact the future.”
“What’s getting deals done is discipline on structure. Earnouts are earning their place at the table again. Sellers who walk in prepared and can defend their numbers are finding genuine interest. And for those who do transact, the work doesn’t stop at close — integration and post-transaction positioning are where value is either captured or lost.”
Beth Garvey, Former President & CEO, BGSF (NYSE: BGSF)Sector Highlights
IT Staffing and Search tied as the most active segments at eight transactions each, together accounting for 46% of Q1 volume. Within IT Staffing, acquirers are increasingly targeting firms with Statement of Work and consulting delivery capabilities rather than traditional time-and-materials staffing. HR Path’s four Q1 acquisitions — bringing its confirmed total to approximately 54 — are representative of that thesis. Traditional IT staffing firms without consulting capability will find the buyer pool narrower than the headline segment numbers suggest.
Light Industrial/Commercial Staffing recorded seven transactions in Q1 alone, compared to just thirteen for all of 2025. Staffing has historically served as a leading indicator for the broader economy, and commercial hours have been running ahead of prior-year levels entering 2026 — a welcome signal after two years of near-dormancy in the segment.
Healthcare was the softest segment with five deals, down from 2025 pace. Other Professional services accounted for seven transactions, including the notable Hunt Companies/Kelly Services governance transfer.
One significant transaction in the quarter warrants brief context. Hunt Companies’ acquisition of 92.2% of Kelly Services’ Class B voting shares from the Terence Adderley trust transferred governance of a $4.3 billion revenue firm to new private ownership following years of financial pressure and a CEO transition in September 2025. It was a governance transfer, not a market-rate acquisition, and should not be read as evidence of renewed buyer appetite for large-cap staffing transactions.
What This Means Going Forward
Q1 was a more active quarter than our Q4 commentary implied was likely, and we acknowledge that. We remain cautious on the full-year outlook. What would change our view is specific:
- Broadening buyer criteria. A shift away from the continued narrowing of what buyers will engage on would signal genuine market improvement, not just volume growth.
- More quality deal flow reaching advisors. Increased activity from well-prepared founders considering a sale with differentiated businesses would test whether buyer appetite extends beyond the narrow band of premium assets.
- Increased private equity add-on activity. PE platforms have been cautious; a pickup in bolt-on acquisitions would indicate improving confidence in the staffing sector’s trajectory.
- Easing of macro headwinds. Inflation, geopolitical uncertainty, and private credit conditions continue to weigh on buyer confidence. Relief on any of these fronts could unlock pent-up activity.
Until those signals emerge, Q1 volume is encouraging. It is not yet evidence that the character of this market has changed.