Factors including well-established specialisms, scalable business models and experienced management teams are among those being cited as contributing to continuing private equity interest in the UK recruitment sector.
Despite headwinds that significantly constrained both private equity investment and M&A activity more broadly last year, dealmaking has remained strong in the UK’s recruitment sector, with private equity playing a key role.
Earlier this year, BDO released its latest M&A report on the UK recruitment industry, tracking dealmaking during 2024. The firm’s research showed that there were 104 transactions in the sector involving a UK entity last year, a 49 per cent increase compared to 2023.
Of these transactions, 29 per cent involved private equity and venture capital buyers. While this was slightly lower as a percentage of the total compared to previous years, the volume of deals increased from 24 in 2023 to 30 last year.
Furthermore, the figure did not include deals completed by industry buyers that are backed by private equity, a buyer class which BDO Deal Advisory Partner James Fieldhouse describes as “becoming increasingly prevalent and ramping up competitive tension in the bid to build out their service offering, scale quickly and capture synergies.”
Discussing the reasons behind private equity’s interest in the sector, Fieldhouse notes that, in addition to the basic need for firms to deploy funds following years of slow investment, there are a number of "fundamental core value drivers” within the recruitment industry.
These include, growing end-user markets, strong and experienced management teams with success in integrating businesses through M&A, well-defined specialisms, diverse revenue streams, blue-chip clientele, scalable business models with the ability to diversify, cash generative businesses and visible earnings.
Deals involving tech-enabled assets are also highlighted as a key trend within recruitment, with close to a quarter of 2024’s deals occurring in the Recruitment Platform/ Software area and 56 per cent of these deals involving either private equity or venture capital funding.
Other spaces within the sector that saw strong M&A activity last year included Executive Search, with deals more than tripling from 2023 to 2024, and Engineering/Construction/Industrial, which saw a similar increase.
Despite resilient dealmaking activity, James Fieldhouse points out that the sector was hit particularly hard by the October 2024 announcement of higher Employer National Insurance contributions and a lower threshold for contributions, which had a significant impact on hiring activity.
This has occurred amid broader economic issues, which have ramped up recently amid the ongoing uncertainty over US trade tariffs, resulting in lower business confidence. However, interest rates have steadied somewhat, a trend that Fieldhouse expects to continue.
Regarding dealmaking prospects in recruitment for the remainder of 2025, Fieldhouse says that BDO expect “positive movements” in the industry, building on strong activity over the past year.
Private equity is expected to continue playing a major role in this, with Fieldhouse pointing out that firms will continue to come under pressure to increase their investments, making recruitment firms that meet their criteria extremely sought after targets.
Find out more about the mounting pressure on private equity firms to deploy funds
For sale is a long-established tree surgery and arboricultural services business with an excellent reputation, serving both domestic and commercial sectors across Southern England, including the Home Counties and London.
An opportunity has arisen to acquire a mechanical engineering company specialising in the Water Industry. Benefitting from over 3 decades of trading, this business has built a solid and long standing client base comprised of prominent UK utility comp...
An opportunity has arisen to acquire a reputable IT support and development services provider with a UK-wide client base and a proven record for innovation and resilience in the constantly evolving IT sector. Throughout its 25+ year trading history,...
Please choose your settings for this site below. For more information please read our Cookie Policy
These cookies are necessary for our website to function properly and provide you with access to all features.
These are analytics cookies that help us to improve the way our website works.
These are used to improve the functional performance of the website and make it easier for you to use.