A Buyer’s Perspective on Staffing Transactions
At HUCAI, we support staffing company owners through every stage of the transaction process: from strategic preparation to successful deal closure. When planning an exit, one of the most crucial steps is understanding the intentions and motivations of potential buyers. After all, the final valuation and transaction volume depend heavily on how attractive the buyer perceives your business to be.
This article explores the buyer’s perspective in staffing M&A and what drives their decisions, how they assess value, and which factors make a staffing business stand out in today’s market.
The process itself can vary widely. There are multiple ways to approach the human capital investment market, much like selling an individual business asset. However, given that valuations in staffing M&A are typically far higher and more complex, it’s essential to proceed with greater diligence.
Below, we outline the key considerations every staffing company should keep in mind to align effectively with buyer expectations and achieve a successful outcome.
Direct and indirect contact by the buyer and response by the seller
Direct contact (i.e. by an employee of the buyer – usually a business developer or M&A manager) or indirect contact by an agent. From our experience, the majority of the approaches are made indirectly, because the buyer often does not want to be perceived openly on the market and only want to make an analysis before they reveal themselves.
It is therefore important to know the players in order to be able to assess who you are talking to here. Possible contacts can be made through the following institutions.
Direct:
- Trade Buyer / an employee of another staffing company
- Family Office / an employee of a funded family
- venture capital investment setup / an employee of a funded investment vehicle
Indirect:
- Bank / Brokers Accountants / Management
- Consultants
- Corporate Finance Houses
How can such inquiries be answered effectively?
Here again, the solution can be divided into direct and indirect. Either you hire someone (BD, M&A manager) who prepares and works through these topics, or you hire an external consultant who will help you and do the work for you.
Basically, we recommend hiring a company like HUCAI to keep these inquiries away from the management of the staffing company and to have them pre-qualified by HUCAI first. There are often “black sheep” on the go who only collect information, and it is therefore necessary to carry out an extensive reference check before data is sent. In addition, it often makes sense to find out who is behind an “indirect approach” in order to remove unsuitable companies from the process from the outset.
Furthermore, the seller can of course contact potential buyers directly/indirectly. Here, too, HUCAI supports the seller in finding the right buyer. It goes without saying that these discussions should always take place under a valid NDA and at C-level in order to avoid negative effects on the business.
How can a pitch deck support buyer evaluation?
The attractiveness of a purchase for the buyer is largely determined by the following three points.
- Strategic fit (market access, skill/industry, valuable asset structure). Au
- Financial strength (both for the purchase and for the financing afterwards)
- Cultural fit (often underestimated, but e.g. cost-oriented vs. innovation-oriented culture do not go together)
There are different tools on the market to determine these points. Porter’s “5 Forces”, also known as industry structure analysis, are certainly a perennial favorite. The following points are considered with regard to a possible acquisition and how are the five forces influenced.
- Bargaining power of suppliers
- Bargaining Power of customers
- Threat from new competitors
- Threat from substitute products
- Intensity of competition in the industry
