127 Acquirers Want To Buy Your IT Firm

Posted in: Factoring Staffing Industry News, staffing factoring, Staffing Factoring Articles, staffing industry, Staffing Industry Financing Company, Staffing Industry Financing News- Aug 15, 2013 Comments Off


Information technology staffing is hot, and so is the M&A market with buyers on the lookout for purchasing a solid IT staffing firm to take advantage of the growth in the IT staffing market.

Staffing Industry Analysts’ 2013 Staffing Acquirers Shopping List was dominated by interest in IT.  Some 255 staffing firms opted to join the list (nearly 50 percent more than last year), each providing their top three segment and geographic preferences for a potential acquisition. The three most commonly mentioned segment preferences were IT (appearing 127 times), IT solutions/SOW (60 times) and direct hire staffing (53 times).

While most of the potential acquirers on this list are IT staffing firms, there are some from other segments, such as healthcare.

“The IT staffing market has gotten good attention from private equity investors especially in light of the successful transactions of Apex and Insight Global in the past year or so,” said Jim Childs, managing director with Childs Advisory Partners. “Private equity investors are primarily interested in IT staffing businesses which have revenue in excess of $50 million and have multiple markets or specific focus.  Healthcare IT has been especially in demand given the strong growth dynamics in that segment.

“We have also seen strong interest from mid-sized firms (firms with $50 million to $500 million in revenue) in buying smaller IT staffing firms to drive their geographic coverage as clients increasingly want national providers.”

While the IT segment is certainly attractive because of high bill rates and gross margins, Sam Sacco of R. A. Cohen Consulting, cautioned that not all IT staffing firms command these margins, especially if they are doing a chunk of business through a vendor management system. For many buyers, VMS dominated revenue is not desirable as they would prefer to invest in companies that have direct relationship with clients. This is particularly challenging as VMS adoption among buyers of IT staffing services is particularly high.

“The key to selling these IT companies, if we can find them, is whether the owner has reasonable market expectations of what their company is worth,” Sacco said. “We are not talking about multiples that rival the pre-Y2K period.  But for a good size, above $10 million in revenue and with decent margins, high teens to low 20s, we see a 4X-5X multiple with the seller keeping their working capital as a reasonable value range.”

Article Source: Staffing Industry Analysts