Finishing up our miniseries on the future of recruitment, we share insights from recruitment experts on what they think will happen in the next 12 – 18 months in the recruitment sector. This blog explores the challenges that are still to be faced as recruitment businesses move out of survival mode.
Not without its difficulties
Echoing the sentiments heard in the rest of this miniseries, Anthony Barnes, Director at The ONE Group thinks “first and foremost [the next 12-18 months] is going to be incredibly difficult. This could be a real challenge with lots of hard work. I think ultimately, it’s going to be a test which will point towards the survival of the fittest. Recruitment agencies that are coming up with new ideas and offering the increased service levels to both candidates and clients will be the people that survive this really difficult period that we’re all going to face.”
John Rose, Director at Vered Consulting, has a story to share with this in mind. “Last week I talked to a recruitment owner. His business is five years old, he has 25 people, he doesn’t have an office, he hired people from all around the country. They work from home, they communicate by Microsoft Teams. Once a month they come together in London for a half-day in a meeting room to talk about the business and to plan ahead. He thinks this is the future. What did he know, and what does it mean for you?”
Moving out of survival mode
Ronnie Lewis, Director at Blue Saffron, has seen three major themes emerge as recruitment businesses move from survival mode into preparation for their return: “Number one, security. after facing the immediate challenges of setting up home working, for example, businesses are now concerned about protecting their data and their compliance obligations.
“Secondly, remote working presents not just challenges but opportunities too. Opportunities for cost savings in office space for example. But you have to ensure that staff are provided with the secure business-grade experience from their home working environment.”
“And finally, businesses are changing their operating models from a traditional fixed based cost model, to more flexible cost-based models and they’re looking at outsourcing to help them do this.”
Others are seeing how they can pivot what they offer. Gary Fay, Founder and Director of Identifi Global Resources, suggests that they plan to “develop new relationships and opportunities in sectors that haven’t necessarily been our traditional place. We won’t move away from being deep specialists in the areas that we do provide recruitment services to, but in addition to new clients, I strongly suspect that we’ll be adding in products and services around the recruitment piece which gives us more access to revenue and opportunity. Personally, we’re quite excited about the rest of the year.”
Partial exits for rising value benefits
With the opportunities abound, there will no doubt be thoughts of exit strategies that rise to the surface. Steven Raize, Partner at Gately Legal, provides insight into the future of mergers and acquisitions in the recruitment sector post COVID-19. “Traditionally recruitment agencies have always been valued on the basis of historic earnings, however the blip or discrepancy caused by COVID-19 causes a problem in that respect. As a result, we are probably going to see more use of prolonged earn-outs. An earn out is an arrangement where part of the purchase price is payable in the future, and it’s conditional on the future earnings or amount of earnings of the recruitment agency, in say two or three years.”
“In addition, similar to post the financial crisis in 2008, we’re also likely to see more partial exits whereby sellers sell 50%, let’s say, of their shares now, with the balance of the shares subject to put in call options exercisable at some point in the future. The benefit from a seller’s perspective by using a partial exit is that if the value of the company continues to rise in the coming years, they will be able to benefit from that rising value when they sell the balance of their shares.”
This brings us to the end of our four part miniseries of the future of recruitment. This series was inspired by our future of recruitment video, which you can watch here. For more information you can check out our Blogs or Resources pages or you can visit the COVID-19 section on our UHY website.
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