Human Capital Management M&A Pulse – Q1 2020

HUMAN CAPITAL MANAGEMENT M&A MARKET DYNAMICS

• M&A activity remained strong in 2019, with 332 transactions completed worldwide across staffing, outsourced services and software and technology sectors. Transaction activity declined  slightly in Q1 2020 when compared with Q1 2019 due primarily to economic concerns surrounding the COVID-19 pandemic, with just ten transactions closed in March 2020.
• Strategic buyers dominated M&A activity in the sector with 91% of transactions, vs. just 9% completed by financial buyers in Q1 2020.
• Staffing-related transactions comprised the majority of HCM transactions, with 43 deals completed across professional, industrial, healthcare, and IT focused staffing firms. Staffing transactions represented 64% of all HCM activity in Q1 2020, increasing slightly from 62% in 2019.
• Healthcare staffing transactions saw the largest year-over-year increase as a percent of total deal volume in Q1 2020, with total deals in the sector increasing from 12% of total volume in 2019 to 19% in Q1 2020.
• North America was the most active region in Q1 2020, with 38 total transactions representing 57% of worldwide HCM transaction activity. North American transaction volume represented approximately 51% of total worldwide transaction volume in 2019.

HUMAN CAPITAL MANAGEMENT MARKET TRENDS & OUTLOOK

• 2019 was a banner year for M&A activity in the HCM sector, propelled by the strong U.S. economy and low employment. The vast majority of activity in the HCM sector was driven by privately-held strategic buyers, including private-equity backed firms, most often seeking companies with complementary services to build out its footprint in target industries or geographies.
• Firms within the Human Capital Management industry continue to also broaden their capabilities beyond traditional temporary staffing or place & search, including investments in outsourced services, consulting solutions, and technology in an effort to differentiate through a focus on value-added, performance-based services.
• March 2020 saw a sharp decline in transaction activity as the impacts of COVID-19 began to take hold, with many deals in market or at confirmatory diligence stages are either moving forward with an extended timeframe or being put on hold as buyers wait out the current uncertainty.