Human Capital: Opportunities to create value in a Human Capital business
Talent shortages have meant investor interest in recruitment has remained buoyant over the last three years. There was a slight dip at the beginning of the pandemic, but it soon rebounded driven by the heated hiring market.
There are roles to be filled even in this current challenging market. We expect to see recruitment agencies with digital specialisms in areas like machine learning / AI, cloud, data, cyber and / or a sector focus like tech, finance and professional services to continue to attract investment.
Opportunities for the mid-tier PE
Investor attention is naturally turning to the HR function and what companies can do to retain and nurture their talent. Consultancies that help businesses hold on to key talent and get the most from it are in demand. This is a wide market and can include:
- Hire, train & deploy that targets skills gaps in a sector and manage apprenticeship schemes (read our recent article about why HTD remains attractive to investors here);
- HR technology, including HCM (Human Capital Management) and EXP (Employee Experience Platforms) that improve workforce management and employee engagement. This supports the shift in management focus to retaining staff and importance of employee experience given the tight labour markets; and
- HCM transformation that can include workforce transformation, rewards, D&I, analytics, talent, benchmarking and organisation design. This is a highly fragmented competitive market where the big four and Accenture dominate in the UK.
For mid-market PE firms, we’re seeing some attractive boutique competitors to the big players who offer better customer service, flexibility and are typically more affordable. The challenge for these boutiques is how to scale at pace while nurturing relationships with existing customers.
Pay close attention to sales and marketing
The sales and marketing engine is critical to success in this competitive, fragmented market. Successful businesses will have an established and industrialised process to screen and diagnose:
- buying persona (i.e. who within the business is the decision maker);
- the ideal customer profile (i.e. minimum/maximum seats, sector/sub-sector focus); and
- clear and compelling value proposition.
Typically, HR spend is discretionary and customers will need a compelling reason to invest. Management teams must be able to clearly articulate why customers buy their product, and the benefits generated.
Opportunities for growth/to create value in a Human Capital business
There is increasing demand for Human Capital technology as businesses continue to adapt to post-Covid working conditions. Tight labour markets and remote working has necessitated a greater focus on connectivity and employee experience. For HR consulting specialists, the opportunity to expand into a much larger Total Addressable Markets (e.g. people and change consulting market segments, deepen HR specialism and offer more services, or international expansion) remains attractive.
For both markets there may be a delay in investment given macro-conditions; longer-term the outlook is positive and favours the well informed and cautiously confident investor.
We’ve recently worked on several Human Capital deals, speak to Matt, Solomon and Rupert to find out more.
Matt McNally, Director
+44 7894 736 523
Solomon Ishack, Senior Consultant
+44 7943 036 633
Rupert Cookson, Senior Consultant
+44 7983 110 150