Recruitment services: On the rebound

Baird Capital Partners kicked things off in late October with the buyout of Nigel Wright Group (NWG) for an estimated £15m. Founded in 1988, NWG is a recruitment consultancy focusing on the consumer industries, with clients including Coca Cola, P&G, Diageo and Walt Disney. The firm offers both permanent and temporary staffing services. NWG currently employs 100 people and posted a £9.6m turnover for 2009.

In November, the Blackstone Group backed its portfolio company Independent Clinical Services (ICS) in the acquisition of Pulse Staffing from HgCapital. Although the deal value was not disclosed, it is widely reported to have been approximately £75m. Founded in 1987, Pulse Staffing recruits health and social care professionals for temporary and permanent jobs in the UK and abroad. This deal was later echoed by rumours of private equity firms circling NHS Professionals, the soon-to-be privatised staffing arm of the NHS.

The trend also seems to extend outside of the UK, as HIG Capital backed German staffing agency 7(S) Personal with growth capital funding in October. The company focuses on temporary staffing of qualified personnel in seven sectors: industry and technology, aviation, engineering, office and finance, catering and service, medical, and information technology. 7(S) employs in excess of 6,000 staff and posted a $300m turnover in 2009.

Finally, Matrix Private Equity backed the MBO of recruitment provider RDL Corporation Ltd through a £5m investment in November. Founded in 1992, RDL specifically targets the pharmaceutical, business intelligence and IT sectors - it sources staff for more than 300 companies.

The fact that most European economies are showing signs of recovery following a couple of arduous years is likely to be a key factor behind these investments, as Matrix partner Jonathan Gregory noted at the time of the RDL buyout: "There has been a flurry of M&A activity across the recruitment sector. As European economies emerge from the recession, the number of permanent hiring decisions is set to increase, driving profit growth for specialist recruitment companies that have deep sector knowledge."

Similarly, Baird believes NWG is well placed to take advantage of increasing competition between European consumer businesses looking to recruit top talent as the level of activity picks up. It also expects the recruitment services market to undergo consolidation, and is considering other potential acquisitions in the sector - a forecast quite akin to that of HIG Capital, which is set to pursue a buy-and-build strategy with 7(S) Personal.

Of course, the dependence of recruitment services businesses on the general macroeconomic environment could be a double-edged sword. With growing fears that the road to recovery could be a long one - and observers even pointing to the risk of a double-dip recession in the UK - time will tell if 2010 was really the best year to bet on a rebound of the employment market.

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