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Charlie Watson, head of recruitment M&A transactions at Connect Corporate Finance, a sector focused advisory firm, talks to industry executive, James Strickland.
CW: Following 20 years of successful trading, why did you decide to sell Passionate About People?
JS: We had built a fantastic company that was 75/25 per cent contract to perm, made up of MSP & RPO in technical engineering and construction, at the time we were looking at Private Equity to help us grow and elevate us from £11 million of gross margin to £20 million. However, during the process we also had ‘fire side’ chats with trade buyers and Staffline made an offer that we could not refuse. It was a great home for the company and a business that really wanted to capitalise on the strength of the staff and robust client base.
CW: What did you learn from the sale process and given your time again, would you do anything differently?
JS: I learnt a lot about the corporate process of selling a company, planning is key and ensuring the business is on an upward trend with contracted revenue. We worked with a strong corporate finance company that helped prepare us for an exit. In addition to experienced advisors, you need a very strong law firm that has respect and experience of completing transactions. I was delighted with my team, and were highly regarded in the sector.
CW: What advice would you give to any recruitment company owner looking to sell?
JS: Ensure the business is positioned correctly, it can be a ruthless process, and you need to ensure no stone is unturned as due diligence is extremely thorough. Timing is everything and contracted revenue is key, so no matter how small the MSP/RPO get a signature on the contract. Ensure the leadership team are aware of the plan to exit and that board meetings are documented thoroughly with actions that are completed. Always look at the worst case scenario when planning an exit, then anything else is a win and don’t be surprised if during the process you enter hard negotiations. You spend a long time with corporate finance people and lawyers so be prepared to work hard to complete the deal. I loved it and learnt a lot!
CW: Since the sale what have you been doing?
JS: I have been under restrictive covenant since the exit and wanted to completely respect and honour the buyers of Passionate about People. I took a year off and now I have invested in a rum company called Neptune Rum which I have already got outside investors and expertise involved with. I am enjoying consultancy back in the recruitment space and I am looking also at acquisition opportunities that I can then build out from. I truly believe there is an opportunity to consolidate the recruitment space by putting 4-5 companies together to create a business making £5-6 million of EBITDA.
CW: Why did you feel the time was right to get back into recruitment?
JS: Timing is everything and with entrepreneur’s relief being reduced to £1 million and the talk that Capital Gains Tax will get hit at some point in the next couple of years, recruitment owners thinking of an exit should be planning now. Covid 19 has hit many recruitment businesses and therefore as we come out of the last 12 months, owners of recruitment companies are thinking what’s next, with the ultimate dilemma of asking themselves how can you crystalise the asset they have created.
CW: What are you looking to do with HRDC?
JS: We are looking to speak with owners of recruitment companies that want to be part of a bigger group, with a strong management team that want to ultimately build a business for exit. Having spent 20 years building a market leading staffing company we have the experience to guide, build and exit a quality staffing company within the STEM sector.
For help and guidance into the recruitment M&A process with Connect Corporate Finance, please reach out to Charlie Brock Watson for a confidential discussion on +44 (0) 7716 655 717 or email: email@example.com