Mirus Capital AdvisorsMirus Capital Advisors

Advice for Entrepreneurs, Mergers and Acquisitions, Pre-sale Planning, BPO, Human Capital Mgmt, Business Services, Selling a Business, Professional Services, Corporate Divestitures, Technology

IT Staffing and Consulting Firms – The Exit Won’t Come From the Big Guys

Posted by

I’ve noticed an interesting trend over the last few years.  The largest IT staffing firms in the US (based on Staffing Industry Analyst’s “2014 Largest IT Staffing Firms in the United States”), are not the ones making acquisitions.

Sure, On Assignment did a couple big deals in the last few years; namely, the acquisition of Cyber Coders in 2013 and Apex Systems in 2012, but they haven’t reported any smaller fill-in acquisitions outside of those deals.  And the other 9 largest IT staffing firms in the US haven’t reported any acquisitions in the US or Canada since 2011.  This includes:

And in general, the 101 deals completed since 2011 were for small companies.  Of those where the target’s revenue was reported, only 5 acquired companies had revenue north of $100 million.  These included:

  • 2011 – PeopleLink Staffing Solutions, $100 million revenue,  acquired by Groupe CRIT SA
  • 2012 – Apex Systems, $705 million revenue, acquired by On Assignment
  • 2012 – Catapult Technology, $150 million revenue, acquired by Strategic Intelligence Group
  • 2013 – CompuCom Systems, $2.3 billion revenue, acquired by private equity firm Thomas H. Lee

Despite the growing economy and the revenue growth being achieved in this sector, the number of deals in the space continues to be less than exciting, as seen in the chart below.  Only 38 reported deals in 2013, and unless the second half of the year really overachieves, we’re on track for fewer deals in 2014.

IT Staffing M&A

So, as the owner of an IT staffing/consulting firm considering an exit today, what does all of this mean to you?  It means you’ll need to reach out to a much broader list of potential acquirers than you might expect.  The list of “most likely acquirers” is probably not the large, name brand firms that get all the press.  Additionally, the small number of deals in the market place means that you’ll have to contact more buyers to find those interested in completing a deal at a price that achieves your goals.

In the best of situations, selling your company can be a second full-time job.  In this environment, you’ll need the help of an investment banker to ensure that all of the potential buyers are reached, and to create the competitive friction that results in the best price and terms for you.

If you are considering an exit and would like to get an objective view about your exit options and how buyers are likely to value your business, give me a call or drop me an email at kiernan@merger.com.