Human Capital Management M&A Pulse – Q2 2024

HUMAN CAPITAL MANAGEMENT M&A MARKET DYNAMICS

The U.S. Staffing Industry has demonstrated resiliency through the first half of 2024, while advancements in talent acquisition technologies and a strong demand base continue to combat downturns in key client industries, such as manufacturing and warehousing. A second consecutive year of forecasted U.S. GDP growth, paired with an expanding contingent workforce, provides signs of near-term market growth following a prolonged period of stagnation.

M&A transaction volumes have remained consistent across the past 6 quarters, averaging ~100 deals per quarter while increased buyer appetite continues to command premium valuations for attractive staffing firms. Place & search, software & technology, and professional staffing observed significant interest from a primarily strategic buyer pool seeking both geographic and capability expansion via acquisition.

What We’re Discussing With Clients

Evolving Talent Acquisition Landscape

Progressive staffing agencies are finding new ways to leverage modern technologies for talent acquisition.  Amidst a suboptimal year for staffing industry performance, staffing firms continue to invest in tech products with the intent of reducing spending elsewhere. The breadth of technologies available includes solutions for analytics, benchmarking, candidate assessment, recruitment marketplaces, sourcing automation, and much more.  A rapidly evolving tech stack has become a key driver of optimized talent acquisition and an area of focus in a competitive M&A environment.

Lackluster Economic Backdrop

While a global recession appears less likely with each passing month, the U.S. GDP growth is forecasted to slow from 2.1% in 2023 to 1.5% by year-end 2024.  The global economy is expected to post its slowest half-decade of GDP growth in 30 years, according to the World Bank’s latest Global Economic Prospects report.  A suboptimal macroeconomic environment continues to have significant influence over stagnant staffing industry growth.  Combined with an uncertain political landscape in the second half of 2024, staffing firms can expect to face continued headwinds in the near term.

Strong Demand Base

While the staffing industry experiences a decline in market size after a sustained period of growth, there continues to be reasons for optimism in 2025 and beyond.  Staffing firms continue to benefit from a strong demand base driven by an increase in contingent workforce programs that many of the world’s largest companies have adopted in a post-COVID landscape.  Combined with the sustained shift to remote work, robust demand for temporary staffing remains prominent and is aided by advancements in staffing platform technologies.