Maximising the Value of a Recruitment Business when Selling Optima Corporate Finance
Our Services Acquisitions Have acted for a range of public and private companies in identifying acquisition targets negotiating & structuring terms and project managing deals to completion Disposals / MBOs Have acted for large corporate in selling non-core business to the management team and numerous business owners selling to larger recruitment businesses Fundraising Have raised and restructured finance for a range of recruitment and recruitment related businesses. Strong contacts with debt and equity funders Commercial Advice Supporting management teams generally when they are starting to consider preparing to sell. We help to develop strategic plans and financial projections to plan and measure performance
Track Record We have completed deals in the following recruitment sectors over the past 15 years: Call Centre Management Finance Construction Healthcare Industrial Domiciliary Care Driving IT Education Rail Energy Secretarial Engineering Social Care
Insider’s Guide to Selling a Recruitment Business What Issues will a Purchaser Consider? It’s all about RISK Brand Strong market presence and reputation Cultural fit Continuing Investment in the Business Motivated team Robust client relationships Spread of clients Healthy & sustainable margins High quality management Profitable business model beyond the vendors Visibility of Profits International presence Compliance
Motivated Team Indicators Length of service Staff turnover Basic pay, commission plan, bonuses, other benefits compared to market averages Woking conditions and environment Other Factors Share ownership Internal Promotion Share options Staff Surveys CSR Policies Awards Training
Sale Process Go to market and approach Strategic R Purchasers E D C E Appoint E Advisor C I Receive an Receive I Offer V Approach D E E A T Evaluate N Prepare Offer O Information A Memorandum S P E P Negotiate Heads L R Supply Of Agreement L Information O A Draw Up C Distribution Due Diligence H List of Strategic (Commercial, Purchasers Financial & Legal) and Contracts COMPLETION
Issues To Consider when Selling Confidentiality Valuation Asset or Share Sale Surplus Assets Earnout Warranties and Indemnities Don’t take your Eye off the Ball
Issues to Consider when Selling a Recruitment Business - Valuation Multiple of Earnings Use of EBITDA Adjustment of Profit Average/Weighted Average of Profits No Absolute Right or Wrong Example EBITDA Yr1 Yr2 Yr3 £100k £400k £250k A. Don’t touch it with a barge pole B. Most recent profit = £250k, then apply multiple C. Weighted average profit = (1x£100k) + (2x£400k) + (3x£250k) = £275k, then apply multiple 6 D. Don’t Know
Issues to Consider when Selling a Recruitment Business - Valuation £’000 600 500 400 300 200 100 0 Year 1 Year 2 Year 3 A. Don’t touch it with a barge pole B. Most recent profit C. Weighted Profit Average D. Don’t Know
What Multiple is Appropriate This will be Determined by: Comparative plc Multiples Strategic Fit Size of Business Risk Factors Niche Specialisms Market Sentiment Recent Deals What the Purchaser is Willing to Pay
Concluding Thoughts It’s all about RISK for the Purchaser Ensure the business isn’t heavily reliant upon you Make the business as robust and sustainable as possible to withstand any nasty surprises Specialists are more valuable than generalists – differentiate You never know when you might receive an approach from someone like us might write to you Use experienced professional advisors who understand the sector
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