Q2 2023 – Industry Insights Report

Q2 2023 - M&A Overview

  • Global mergers and acquisitions activity fell 36% year-on-year in the second quarter. The total value of M&A fell to $732.82 billion in the second quarter of 2023 from $1.14 trillion in the second quarter of 2022, according to Dealogic data.
  • North American staffing M&A transactions were down both sequentially and year-over-year in Q2. Momentum Advisory Partners noted a total of 27 announced transactions in the quarter versus 33 announced transactions in Q1 and 39 in Q2 2022, respectively.
  • The substantial majority of transactions continue to be among the lower middle-market, while larger transactions remain few and far between.
  • Search/Direct-Hire businesses recorded the highest volume, accounting for a third of all announced transactions in the quarter.

M&A activity in the staffing industry was down notably in Q2 2023. A slowdown in job orders across the market, higher capital costs and tightening credit conditions, have triggered a larger decline in M&A activity than anticipated.

Prioritization of strategic growth initiatives by those looking to acquire has been reset. In our regular discussions with active M&A participants on the “buy-side”, most have noted that their threshold for acquisitions in the last 6-12 months has been much higher than in years past. The threshold increases as the price-tag grows. As a result, we expect smaller transactions to continue to dominate the market in the second half of the year.

We asked Christopher Moulton, who leads the Tandym Group’s M&A initiatives in the staffing industry for his view on the market. Tandym has been among the more acquisitive organizations in the market in recent years.

Their acquisition of AETEA Information Technology in Q2 is followed by two acquisitions last year: Metro Systems Inc., a Virginia-based IT staffing firm, and Longford & Co., a strategic consulting and executive search firm based in Boston.

“The volume of larger and more importantly “quality” in-bound deal flow (i.e., businesses with sustainable levels of operating performance, committed teams, low levels of customer concentration, etc.) has certainly declined year-to-date relative to 2022 and years past.  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.  That said, we continue to dedicate a considerable amount of time building relationships with founder-led “boot-strapped” firms which has provided us with an actionable pipeline of truly strategic opportunities for us going forward.”

M&A Transaction by Sector

Notable Q2 2023 Transactions

Acquired Co.

Omaha, NE (June 13, 2023) – Jackson Healthcare, ranked as the 5th largest healthcare staffing firm, has recently acquired LRS Healthcare which is known to be the 25th largest.  The company will continue its operations in nurse and allied health staffing out of the headquarters in Nebraska along with the rest of the colleagues while having the support of the Jackson team as well.  

Acquired Co.

New York City, NY (May 23, 2023) – Momentum Advisory Partners announced that Seneca Resources, a leading IT engineering and staffing firm, has acquired QED National, an IT staffing firm based in New York City. This is the first acquisition since the majority stake that Caymus Equity has taken in Seneca Resources. Momentum Advisory Partners acted as the exclusive advisor to QED National in the transaction.

Acquired Co.

Andover, MA (April 25, 2023) — Alku, a provider of IT and life sciences staffing out of Massachusetts holds the position of one of the largest staffing firms in the United States, expecting to achieve $1 billion in revenue by 2025.  They have recently announced a majority investment in the company from New Mountain Capital, a New York based private equity firm. This is one of several investments being made back into the company by several private equity firms from across the United States.  

Momentum Advisory Partners Advised Q2 2023 Transaction

Seneca Resources, based in Reston Virginia, has been providing IT and engineering staffing solutions since its formation in 2010.  In addition to this recent transaction the company has had a majority stake taken in it by Caymus Equity back in September of 2022, which marks this as the first transaction since the private equity backing.  This deal strengthens the company’s background in the IT and cybersecurity space because of the nature of QED’s clientele. 

Based in New York City, QED National is a provider of IT consulting and cybersecurity and has been doing business since its incorporation in 1993.  The Company was started by Collen Molter and her son Dustin has taken the lead since the transaction and will now be accompanied by the Seneca Resources team.  QED National had approached Momentum in the summer of 2022 and with the help of our vast network we had resolved that the team of Caymus Equity and Seneca Resources was the right fit for the company to move forward and grow the business from the offices of Albany and NYC.  

Principal and investment lead Blake Cummings stated that “Partnering with QED represents meaningful progress toward achieving our strategic objectives for Seneca in the first nine months of our investment.” “We recognize the value of IT consulting expertise in today’s marketplace and are excited to leverage QED’s leading capabilities in this area as we continue to build the premier IT staffing and consulting business in the industry.”  The addition of QED’s network will vastly help the expansion that Blake mentions and with the strength of the cybersecurity market in this quarter we can only see that the acquisition is very beneficial for the Seneca Resources team.  

Following the acquisition Dustin Molter will remain at his position within the company and join forces with the leadership of Seneca and reside as the Managing Director in the company’s New York City home. 

Q2 2023 Announced Transactions

Q2 2023 Announced Transactions (cont’d)

Selected Momentum Advisory Partners Transactions

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