Private equity firms have become increasingly interested and active in the staffing industry since 2010, due in part to several successful investment realizations. The capital raised by private equity firms from 2002 to 2008 was largely under-invested, leaving these firms with more than $500 billion in uninvested capital after the recession. In mid-to-late 2010, we noted a shift in private equity firms’ willingness to invest in platform companies, often outbidding many prospective strategic acquirers. This seemed to be a combination of private equity firms’ desire to put capital to work along with the reemergence of well performing companies post-recession. The private equity community has favored larger transactions and has had a significant interest in managed services offerings. Recent notable private equity transactions, many of which traded at attractive multiples, include ZeroChaos, Pinstripe, Fieldglass, EmployBridge, Comforce and Creative Circle.
Recently, however, private equity firms appear to be reaching capacity in terms of deal flow. There is still significant capital on the sidelines, last estimated to be approximately $430 billion, but due to capacity constraints, private equity firms are becoming more selective on the deals in which they choose to participate. The main driver for this is a dramatic increase in opportunistic sellers — those exploring whether the “right” deal is attainable. Some private equity firms have said that deal flow has increased four to five times when compared to just a month or two earlier. This increase in deal flow has put a portion of the leverage back to the benefit of the buyer; while not all of the increased deal flow will relate to closed transactions, it should continue to fuel the upward trend. Those sellers seeking the pricing of recent mega deals need to be cautious.
For more details, read the full article in the December 2012 issue of Staffing Industry Review magazine.