So, you've worked very hard building up your recruitment business and now you want sell (or at least see what it’s worth).
The problem with selling a typical recruitment business though, is that there isn't such a thing as a typical recruitment business. It's very difficult to just apply some strict set of criteria in valuing a business without taking into account everything that makes your business successful and unique.
Even thinking on a basic level, is it a contract/temporary led business. Is it permanent led? All of this makes a massive difference in valuation. However, the real value is in understanding what makes the business successful and being able to clearly demonstrate this to potential purchasers.
By way of an example, last year we were asked by a recruitment company owner to value his business because the firm he had previously asked, had given him a very low estimate. So low in fact, they decided that it wasn’t even worth considering selling. Their reasoning behind such a valuation was that the business was completely permanent driven and had no retained/secured clients. Therefore,it was very risky and any potential buyer would want a return very quickly to mitigate the investment risk.
What the original M&A firm had missed (presumably because they had never sold a recruitment firm before) was what a strong and stable permanent recruitment business it was. It had been trading for 8 years, had multinational clients that they had Tier 1 PSL status with (and had done for a number of years). They had consistently placed high calibre candidates with this firms, year in, year out and maintained excellent fees in excess of 20%. Combined with very low staff turnover and a very high average yearly fee income from the consultants, it all pointed to a wonderful business. This was proved when we ‘looked under the bonnet’ of the company and prepared a comprehensive Information Memorandum (our ‘sales brochure’ for the firm).
When we sold the business last year, we achieved four times the original valuation because we were able to understand what we were looking at and more importantly, we were able to communicate this to potential purchasers.
In most areas of our life, we seek out a specialist for the important things, specialist doctor for a specific health issue, a garage that specialises in our make of car and so it makes sense to talk to a specialist in selling recruitment firms when you are looking to sell yours. And, unlike the doctor or garage, you don’t need to want to sell your business right now to speak to us. Three-quarters of the people on our books aren’t looking to sell for several years but they see the benefit of having a relationship in place with our firm so that when they do wish to sell, we already know all about them. They benefit from our market insight and strategic advice which helps them to continue to grow and become more profitable. Also, being on ‘our radar’ also means that even if they aren’t thinking of selling, they can always consider an exceptional offer if one comes along. Never say never, if the price is right.
If you are interested in discussing what AA Chase could do for you, call our Head of M&A, Andrew Thomas on 07973 832216 for a confidential and no obligations chat.