Human Capital: is recruitment still an attractive sector for UK mid-market PE?  

The economy grew by 0.6% between January and March, but according to the latest ONS data, overall, UK vacancies are down. However, it should be noted there is significant variation between industries. We expect the focus of the new Government (whatever the colour) to be on skills, employment and productivity. What is less clear is the impact on the human capital sector; it’s too early to know.

Even in a poor macro environment, experience shows where firms need talent there will always be opportunities for specialist recruitment firms with deep sector knowledge to succeed. There will also continue to be opportunities to improve and streamline the recruitment process, particularly via technology.  

Regardless of the state of the economy, the key questions for investors when considering a recruitment business remain the same: 

• Does the target operate in attractive, candidate short end markets with growing, resilient demand and structural skills gaps? 
• Does the target possess deep subject matter expertise in its specific sectors and (ideally) sub-sectors? 
• Does the target have a strong set of ‘incremental differentiators’ that make it the preferred choice for its customers? 
• Do KPIs show low customer and fee earner concentration and clear evidence of strong, growing customer relationships? 
• Does the target successfully manage to attract, train and retain high-performing fee earners, and is the environment attractive enough that fee earners will stay rather than going elsewhere? 
• Does the target have a business plan which is based on more than just adding headcount?  

Speak to a member of the team about our views on the human capital sector.

Matt McNally

[email protected]
+44 7894 736 523