Private equity investment and improving conditions pave way for long-term M&A activity

By Keely Woodley, Carl Parker, Bilal Khan, and Eliott Rawling

Large-cap private equity is once again backing platform recruitment deals. Our experts explain why this trend, combined with improving indicators, is sparking interest in mid-market recruitment companies.

People discussing plans

UK Recruitment market indicators (job vacancies and market size)

Graph depicting the UK Recruitment market indicators (job vacancies and market size)

Source: Office for National Statistics, Mintel

Throughout 2024, shifting market conditions – rising inflation and interest rates, falling job vacancies and a contracting recruitment market – meant businesses in the sector experienced challenging trading environments.

There’s no doubt that the interplay of economic and geopolitical factors curtailed buyer appetite and wider certainty in the M&A market last year. However, the latter half of 2024 demonstrated more positive signs of recovery for the recruitment sector, with the stabilisation of interest rates, opening up of debt markets, and number of job vacancies returning to their long-term pre-COVID-19 norm, improving buyer confidence and M&A activity – demonstrating the sector’s ongoing resilience.

Notwithstanding, the challenging economy has fuelled opportunistic and accelerated (AMA) deals, increasing volumes compared with the same period in 2023 – a recent survey conducted by The Times saw UK business closures hit a 20 year high in 2024.

 

UK Recruitment M&A - Rolling 12 months Trends

Graph depicting the UK Recruitment M&A - Rolling 12 months Trends

Source: Grant Thornton proprietary data, and M&A databases (Bureau Van Dijk Orbis M&A, Mergermarket, Capital IQ)

 

 

Bilal Khan's photo
“While conditions have been challenging, we’ve also seen a resurgence of large-cap investment activity in the sector, supporting a return of market confidence. The participation of bigger players has ignited interest in midmarket assets, we expect this to drive increased mid-market M&A activity, as investors seek to build on new platform investments.”
Bilal Khan Director

Large-cap private equity and trade buyers get active globally

Bain Capital takes Outsourcing Inc private

In December 2023, Bain Capital, with over USD 180 billion of assets under management, agreed to take private Outsourcing inc., the listed Tokyo outsourcing and staffing firm, ranked 10th globally for size among staffing providers, in a deal valued at USD 1.3 billion. This marked the return of large-cap platform M&A to a sector hit by a slowdown in performance following an initial post-COVID-19 boom in activity.

Onex invests in Morson Group

In February 2024, US-based Onex Corporation, with over USD 50 billion of assets under management, announced a majority investment in Morson Group, a UK engineering and technical staffing and workforce business with over £1 billion turnover – a move designed to accelerate the company’s growth trajectory and expand its global footprint.

CVC Capital Partners backs World of Talents

In April 2024, CVC announced a majority stake in World of Talents (EUR 350 million turnover), a staffing firm operating in Belgium, the Netherlands, France, and Germany. With EUR 186 billion of assets under management, CVC’s strategic investment is expected to facilitate World of Talent’s ambitious strategy to become the largest pan-European network for white-collar staffing.

Kelly Services acquires Motion Recruitment Partners

In May 2024, Kelly acquired Motion Recruitment partners, valued at USD 425 million – the largest in its history. The deal was aligned with Kelly’s strategy to focus on higher-margin staffing segments, deepening the Group’s expertise in consulting and RPO solutions across North America.

Impellam Group bought by Dutch company

In March 2024, Dutch technology recruitment specialist HeadFirst Group announced the acquisition of Impellam Group (over £2 billion turnover) to become one of the world’s leading STEM talent and managed-service providers, with a distinctive HR tech platform for professionals. IceLake Capital backs HeadFirst.

Cognizant completes acquisition of Belcan

In September 2024, the thirteenth- largest engineering staffing firm in the US, Cognizant, completed its acquisition of Belcan for USD 1.3 billion in cash and stocks. Belcan is a leading global supplier of engineering research and development (ER&D) services for the commercial aerospace, defence, space, marine, and industrial verticals. The acquisition is expected to significantly strengthen Belcan’s engineering capabilities and consolidate its US market position.

Nash Squared completes strategic divestment of subsidiary, NashTech, to PAG

PAG acquired NashTech in December, the IT outsourcing subsidiary of Nash Squared, to bolster its growth in the UK, US, and Asia-Pacific markets. The divesture is part of Nash Squared’s long-term strategy to focus on core talent solutions, while NashTech aims to expand its global presence under PAG's ownership.

UK specialist recruitment – resilient public-facing sectors and certain niche players come out on top

UK Recruitment M&A - Key sectors

UK Recruitment M&A - Key sectors

Source: Grant Thornton proprietary data, and M&A databases (Bureau Van Dijk Orbis M&A, Mergermarket, Capital IQ)

Recruitment for public-facing sectors, such as education and health, and certain niche specialists has been more resilient over the last two years than other industries, such as life sciences, financial services, and technology. After years of record growth, companies operating in the life sciences and early-stage tech sectors have had to focus on profitability and cash conversation, financial and professional services deals also slowed, with the sector resetting from a period of post-COVID-19 overhiring and salary inflation.

For example, tech industry redundancies peaked in 2023 at over 260,000, and while not as high in 2024, there were still over 150,000. This did impact recruiter performance in the sector and fuelled an increase in AMA transactions for these companies.

The need for a strong end-market explains why certain niche recruitment firms have been high on investor shopping lists.

Green shoots for specialists supporting the public sector

Specialists supplying to the public sector have demonstrated resilience, particularly in education as strong demand from schools means agencies are consistently relied upon for supply. Traditional staffing firms in this space have also begun to transition into wider education service groups to become truly embedded in a school’s ecosystem, by providing end-to-end solutions –generating momentum in M&A consolidation.

Education deals lead the way

  • The Edwin Group’s landmark US deal 

Read more about this deal – click here

Our M&A team advised UK-based Edwin Group on its July 2024 sale to Quad Partners, a US investment firm specialising in education and workforce development. Edwin Group works with UK schools and multi-academy trusts to recruit, support and retain leaders, teachers and support staff. The deal marked an exit for LDC following a threeand- a-half-year partnership.

  • Pricoa chalks up TeacherActive acquisition

In March 2024, Pricoa Capital supported TeacherActive’s debt refinancing and shareholder recapitalisation, which our strategy team provided commercial due diligence on. The Birmingham-based recruitment firm is one of the largest education recruitment agencies in the UK, and will use the capital to expand its geographic reach.

  • Another acquisition for Operam

Read more about this deal – click here

Our M&A team also advised London-based recruiter Horizon Teachers on its June 2024 sale to Operam Education. The deal marks Operam’s eighth acquisition and extends its reach beyond the North and the Midlands. Other acquisitions in its buy-and-build strategy include The Education Specialists, Teachers UK, Key Stage Teacher Supply, First for Education, Bridge Education, and Provision Recruitment.

This deal came just before Operam Education’s own capital event, receiving investment from Three Hills Capital Partners in November, which our transaction advisory services team led the vendor due diligence on. Investing alongside current investor, BGF, the partnership is expected to accelerate Operam’s buy and build strategy, offering further capital and regional opportunities for growth.

Humly acquires Future Education to secure London footprint

In September 2024, Humly acquired Future Education, continuing its ambitious buy-and-build strategy across the UK by providing an entrance into the London market. The transaction has followed five successful acquisitions since 2021, with plans to utilise an impressive technology stack to transform the education-supply sector.

Zen Educate receives EUR 34 million in funding

Zen Educate, an online marketplace connecting schools with substitute teachers and assistants, successfully completed the largest round of funding in European Edtech in May 2024 from a range of investors. This is expected to help support its buy-and-build strategy and scale the company’s new workforce – management software, which includes SaaS products for credentialing, compliance, and absence management.

Continuing with public sector specialists, healthcare staffing has also seen sustained M&A activity. This has predominantly been driven by tech disruptors transforming traditional agency models, to improve candidate experiences, and enable higher-margin revenue streams.

Aya Healthcare completes UK market-entrance through acquisition of ID Medical

At the start of last year, Aya Healthcare, the largest healthcare staffing firm in the United States, acquired ID Medical, a leading workforce solutions provider for the NHS. This strategic move expanded Aya’s global presence, introducing advanced technology to UK clinicians and streamlining shift booking processes for the NHS.

 

Investors find their niche within executive search

Carl_Parker
“Individuals are typically less inclined to make career moves during periods of economic uncertainty and heightened concerns surrounding job security. However, resilient sub-sectors of the market have continued to deliver growth and see investor activity.”
Carl Parker Partner

Sports and media recruitment

In February 2024, US sports, media and entertainment consultancy Elevate acquired UK-based SRI talent and rebranded it to Elevate Talent, an executive search firm focusing on entertainment, lifestyle, sports, and other sectors. Our M&A team advised SRI, which has offices in Europe, North America, and APAC.

People for private equity

Read more about this deal – click here

In December 2023, Three Hills Capital invested in LCap (Drax Executive, Rowan, and Altus), a specialist leadership advisory and analytics firm focusing on high-growth companies and private equitybacked businesses. We acted as M&A advisers for the shareholders of LCap, which will use the investment to consolidate and expand into new geographies.

 

Talent solutions: managed service providers and recruitment process outsourcers

Managed service providers (MSO) and recruitment process outsourcers (RPO) have consistently attracted investor interest due to their recurring revenue streams, long-term contracts, and strong client retention. They take a more consultative approach and are deeply embedded in client organisations to understand their specific challenges. Unlike contingent services, these models offer solutions tailored to large-scale projects and high-volume hiring needs, making them particularly appealing for businesses with significant workforce requirements.

Throughout 2024, we saw some consolidation in the talent solutions space, including:

GI Group acquires Kelly

At the start of last year, GI Group made its largest acquisition, purchasing Kelly’s European staffing business for EUR 130 million. This bolsters GI Group's RPO and MSP capabilities, while allowing Kelly to concentrate on its more profitable markets in North America, as part of a wider strategy to enhance EBITDA margins.

Advanced RPO acquires Aspirant RPO

In May 2024, we saw consolidation in the US market, with Advanced RPO acquiring Aspirant RPO to obtain service expertise in the chemical and manufacturing industry and expand its client base and talent-advisory offering.

Hueman People Solutions acquires PrincetonOne

In June 2024, Hueman People Solutions expanded its East Coast presence by acquiring PrincetonOne, based in New Jersey. This strengthens Hueman's scalable RPO offerings across pharmaceuticals, biotech, life sciences, manufacturing, and industrial markets.

Sanderson Solutions Group acquires Outsource UK

More recently, Sanderson Solutions Group expanded their STEM expertise through the acquisition of Outsource UK. The deal is expected to create a combined entity of 4,000 workers under management.

Considering the Autumn Budget

Capital gains

A rise in both capital gains tax (CGT) and the tax rate applied to carried interest had been widely expected in October’s Budget but the level of increase remained a key question. Effective immediately, the Government announced that CGT (at the highest rate) will rise from 20% to 24% and from April 2025, and the tax on carried interest from 28% to 32%.

While any increase in taxation has impact, the level announced still presents an attractive environment for management incentives and investors and is unlikely to discourage ongoing deal activity. The revised rate still represents a favourable reward for taking entrepreneurial risk and, indeed, entrepreneurship continues to be encouraged, with Business Asset Disposal Relief (BADR) being retained, albeit with the rate increasing over two years to 18%. We therefore expect the impact on M&A to be less severe than anticipated, with the announcements ensuring the UK remains an attractive and internationally competitive environment for investors.

Employer National Insurance Contributions

The other factors to consider for the recruitment sector and deals market more broadly are the April 2025 increases in Employer National Insurance Contributions (NICs) from 13.8% to 15% combined with a lowering of the threshold (from £9,100 to £5,000). The rise in employers NICs is expected to have an impact on hiring decisions and promotions, potentially contracting the recruitment market in the short-term. This will also directly hit profitability / EBITDA, given it’s a ’tax on trading’ rather than a tax on profits, underlying earnings and valuations.

The lowering of the threshold means these changes will have a proportionally bigger employer cost impact on lower paid employees, hence we expect any recruitment demand impact of this to be felt across entry level and junior roles rather than the market more broadly. As such, niche recruiters hiring for senior roles across in-demand sectors should be largely insulated from these changes.

Stephenson_Philip
“Management teams will also need to consider the impact on working capital and cash flow, particularly in the temporary recruitment space where increased NI contributions may require settlement before customers settle sales invoices. Invoice finance is a common source of funding in the sector and may help to alleviate this pressure if used correctly.”
Philip Stephenson Partner

A brighter outlook on the horizon for recruitment M&A

The over-hiring post-COVID-19 and subsequent market cooling led to an element of self-correction in 2024. However, the sector has seen a return of large-cap deals, continued investment in resilient sub-sectors and a focus on growing niche specialists, driving an increased focus on mid-market activity. As we progress through 2025, the below additional factors will further spur recruitment M&A.

Inflation is back under control, interest rates are reducing, and debt terms are improving

UK inflation and interest rates

UK inflation and interest rates

Source: Office for National Statistics, Bank of England

The first interest rate cut in over four years and a better outlook for the sector have increased lender appetite. Borrowing terms have improved, and we expect to see a gradual increase in leverage as base rates come down. Lenders are seeking companies associated with robust end-sectors, such as education, as well as solid KPIs: quality customer base, repeat revenues, and staff retention.

Job vacancy rates are stabilising

Since 2022 job openings have consistently decreased since the post- COVID-19 high, putting pressure on recruitment businesses, but this trend has now flattened, providing a more stable environment for recruitment businesses to operate and grow in. Current job vacancy numbers are also more closely aligned with pre-pandemic levels, signalling a return to a more predictable market landscape. There’s also increased market optimism surrounding the UK economy, demonstrated by the results of our Business Outlook Tracker in December 2024. This shift provides recruitment firms with a clearer picture of demand, enabling them to recalibrate and adjust operations in line with supply and demand.

Recruitment agencies adapt to market dynamics

Challenging market dynamics have meant that many agencies are increasingly exploring alternative models to enhance margins and drive growth. For example, addressing the talent gap and the need for upskilling, through integrating training services, adopting train-todeploy models, and offering statement of work (SoW) solutions are becoming key differentiators to create stickier revenue streams and more valuable businesses. Additionally, expansion into new geographies continues to present significant opportunities, with the US particularly sought after given the notably higher margins and short notice periods. There’s also been strong interest in Germany, and we’re actively supporting clients in their expansion into these regions as part of a broader diversification strategy.

Government certainty

The UK General Election provided the M&A community with muchneeded political certainty. The new Government’s growth plans, including planning reform to encourage house building and investment in green energy and AI will require recruitment. For example, making the UK a clean-energy superpower should create 650,000 high-quality jobs. 13,000 could come from Labour’s plans to 'unleash AI' across the country. The outcome of the US election is also allowing business owners to plan more strategically, and while we have some short-term turbulence we anticipate that political priorities will have stabilised by H2 of this year and the improvement is expected to support M&A momentum.


Large deals marked the beginning of a recruitment M&A recovery. Now, mid-market buyers and sellers are limbering up to join the race. Our advisory team is expecting a busy few years ahead.

For more insight and guidance, get in touch with our experts

Keely Woodley
Keely Woodley
Head of Transactions Advisory and IF&R
London
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Carl Parker
Carl Parker
Partner
London
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Bilal Khan
Director
London
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Eliott-Rawling
Eliott Rawling
Director
London
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