While healthcare and tech grab headlines for record fundraising hauls and deal volumes, another corner of the M&A market is luring dealmakers with promises of attractive returns for selective buyers. 3i’s global head of business and technology services Andrew Olinick highlights the sector’s potential.
“The market is competitive; you really need to pick your spots before you look at businesses,” Olinick says. “Our approach is to be thematic and select areas we want to invest in before we look at specific companies.”
That means mapping a subsector, meeting its executives and identifying potential takeover candidates before a process is even launched. It’s a process that’s yielded attractive opportunities in business services.
The tailwinds facing business services are strong: the sector is virtually inflation-proof, and valuations are surging, anchored by substantial deals.
Recruitment services provider Wilson Human Capital Group exemplifies the opportunity. 3i spent time developing relationships with managers in recruitment outsourcing after researching the industry’s potential to become more technologically enabled and benefit from scale.
“Large companies are still getting started on using recruitment process outsourcing (RPO) firms so there is a lot of whitespace for RPO businesses to pursue. Once a business becomes a customer, they’re on long term contracts and benefit from being able to hire more people,” Olinick explains.
Wilson’s reputation shone through the pack, and Olinick’s team was able to catalyze discussions prior to the launch of a formal sale process.
3i’s interest in Wilson looks prescient as a record number of Americans resign from positions.
“There’s a war for talent in many sectors: healthcare, technology, even industrial and retail,” Olinick explains. “What we’ve found in the space is that companies that handle the whole recruitment function get more consistent access to talent on a faster, better track; they’re absolutely able to deliver better results to clients more cost effectively.”
Companies similarly exposed to the ramp up in recruitment could also see secular tailwinds.