Sharp fall in UK deal activity

Recruitment companies are expected to rise to the current challenges being faced

Transaction volumes in the UK recruitment industry have fallen by 50% in the first half of 2020, according to the latest report from national accountancy and business advisory firm BDO LLP.

The report revealed that nine deals were completed to the end of June 2020 (18 in H1 2019), with a continuing drive towards recruitment and HR technology – 33% of UK deals fell into this sub-sector. Notably, there was a significant decline in M&A activity during the lockdown period, with deal volumes also considerably lower in the first quarter of 2020 pre-COVID.

Despite the sharp fall, in the short period post-lockdown, the BDO Recruitment FTSE Index rallied, recovering from 42% below its value 12-months ago up to 24% behind that level at the end of June.

Globally, 44 deals were completed in the first half of 2020, compared to 108 in the whole of 2019 (58 in H1 2019). Of those transactions, c.30% have involved private equity – almost the same number of deals as in the whole of 2019. The increased activity was anticipated, given the level of capital that has been raised by institutional investors, family offices and high net worth individuals, as well as lower than expected deal volumes during 2019.

The report also highlighted that the total number of vacancies between March and May 2020 has seen the largest quarterly decrease to 330,000 since the survey began in 2001.

James Fieldhouse, Managing Director, Mergers & Acquisitions at BDO LLP in the North, explained: “Whether the recovery is V-shaped, U-shaped or otherwise, we expect the recruitment industry to rise to the current challenges being faced, although the potential impact of the impending winding down of the furlough scheme requires a note of caution to be sounded.

“Going forward, we anticipate seeing cash-rich, well-capitalised recruitment groups or investment firms continuing to be acquisitive, albeit with some preferring to seek out more opportunistic acquisitions.”

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