Cas Schneller, managing partner of FFL Partners in San Francisco, heads the middle-market PE firm’s investments in business services, including human resources services. In April, he led FFL’s $100 million investment in Velocity Global, a provider of employer-of-record services. Schneller shared some insights with Mergers & Acquisitions in this Q&A.

What is attractive about human resources services right now?

HR services is a large, growing segment that has the potential to touch every business, regardless of geography or end market. Companies are increasingly viewing HR as a strategic area of focus, yet HR is rarely a core competency, so there is clear value in outsourcing to specialists, such as staffing firms, training providers and professional employer organizations.

What trends are driving the segment?

The nature of work is changing, with employers and individuals looking for more flexibility in location and time commitment. An entire ecosystem has developed to support this shift toward a “work from anywhere, hire from anywhere” mentality, and this has only been accelerated by Covid-19.

What’s your investment strategy for HR services?

We look for growing businesses with clear differentiation and value proposition for their customers. Our targets typically demonstrate an opportunity for recurring or re-occurring revenue, with limited cyclicality.

What future trends are you watching for?

We invest in tech-enabled services businesses and believe that both the technology and the people are critical to success in this space. As we look forward, getting both of these components right is an important focus for our existing investments as well as potential opportunities.