Sometimes the next best move for your staffing business is to combine your competencies with an existing firm. Whether that is by purchasing a firm or selling your firm to someone else, there are many compelling reasons to do it. But before diving into the process, it helps to be aware of how it will all work and things to avoid along the way.
In this blog, we discuss four things you need to know when it comes to staffing firm M&A transactions.
1) Get a Partner Who Has Been There Before
Whether you are buying or selling, it helps to have a partner or a team across different professions to assist you along the way. In staffing and recruitment agencies, acquiring companies are often looking for experienced partners in the legal, finance, or investment banking fields. You can also choose an industry partner like a payroll funding firm to help you; we often help our clients with this process. Whoever you end up choosing, just make sure it’s someone who has done a staffing merger or acquisition before.
If you don’t know where to start, ask industry peers who have been through the process to recommend a partner.
2) Set Yourself Up for Business Valuation
If you are selling, put yourself in a good position by putting all the most important pieces in place: the right people in leadership roles, good customer mix, choosing industries with good growth potential and keeping good and accurate financial documents.
If you are buying, do your due diligence. At the end of the day, you are determining if the firm you are buying will be profitable in the long term.
How to value a recruitment business
To value a staffing company, you have to assess the financial performance of the staffing firm over a period of 3 to 5 years. That means looking at the balance sheet, income statement and more to determine debt structure, historical cash position, net worth, gross margins, current pricing, EBITDA, etc.
3) Research More Than Just Pricing Structure
Merging two different companies together on paper is one thing – it’s another to try and mesh company cultures together. An important part of the M&A process is asking questions to get an idea of what the company is really like. What’s the company culture like? What are the HR (human resources) challenges? Are the two corporate cultures compatible?
Ask these questions ahead of time to save yourself trouble in the long run.
4) Pay Attention to the Fine Print
When it comes time to sign the contract, make sure you have a deep understanding of what it says so you don’t have any surprises waiting for you on the other end. Have a lawyer review the contract carefully so that both sides are happy – and that includes the employees too!
How We Can Help
If you are considering selling your temporary staffing firm, we can help you determine the value of your firm, analyze market trends, create basic offering documents and introduce you to potential buyers. We have relationships with an entire network of staffing firms, and chances are we can help.
If you are buying, we have diverse backgrounds in law, finance, accounting, and credit, so we have the skills and experience necessary to help you zero in on the types of acquisition targets you should be looking at. If you want to expand your operations by purchasing, we can introduce you to a potential partner through a vast array of industry contacts. We can help you evaluate how much your potential acquisition is worth, and develop a deal structure to complete the purchase.
Jeremy Bilsky is the Senior Director and General Manager at Advance Partners. Jeremy has direct leadership responsibility for the Advance Partners business unit, leading the senior management team and all related functional areas. Jeremy has been with Advance Partners for over 15 years in many capacities, including General Counsel, Director of Portfolio Management, and serving on the executive team managing and overseeing Advance Partner’s internal risk functions. Read full bio