As someone who has both bought and sold recruitment businesses over the last few years, I’ve always had a fairly open mind about M&A activity and how it can be embraced to supercharge a business’s growth trajectory. There are some good, bad and downright ugly examples of deals out there in the market, and my personal experience has covered all three!
Last year we merged Proco Group with Proco Commodities (formerly CSP), a firm that specialises in senior-level mandates in the global commodity trading and supply chain markets. We have long seen this area as the beginning of the journey for practically all the products manufactured by our clients: our automotive clients buy from metals traders, our food and beverage clients buy from sugar traders, and so on.
So, the desire to complete the cycle in terms of the full end-to-end supply chain has been there since day one for Proco, but there were a number of obstacles in our way that made a merger the most viable option. Attempting to do it organically would have taken years for a start, and wouldn’t have given us the return that the same investment made over that period in Proco would have done.
In the end, it was a no-brainer. Thankfully, in the first 12 months, we have integrated our front and back office teams, our leadership and our systems, and over that period the group’s income has increased by 27%, and our earnings by close to 350%. It has already paid off in a better way than even the most optimistic amongst us could have hoped.
Not all M&A in recruitment goes so well. One of my previous companies that I sold to a private equity-backed MBO struggled. It was sold in 2008 with 130 people in six offices globally, generating a net fee income of more than £10 million, and was extremely profitable. But in three years it had gone into administration, gone through a pre-pack purchase by the incumbent team, had more money pumped into it, and then gone kaput again!
Timing is sometimes everything, and that business was bought five months before Lehman Brothers crashed, but other companies survived that. What killed the business was the fact that another firm was bought that culturally had nothing in common with the existing platform, and so from day one there was a lot of ego, suspicion, competition and resentment that in the end caused its demise.
There are lots of groups that set off on a buy-and-build strategy that is actually a buy-and-buy strategy, when clearly anyone with half a brain will point out that the magic equation is (Quality) M&A + Organic Growth = Great Business.
Good acquisitions work and can be assimilated quickly and effectively. What is required is strategic identification of a target, then an uncompromising focus on building a strong culture, which means being even-handed as a leadership team across all elements of the company, and being brave in the opportunities provided to everybody.
Overall, when looking at potential M&A, as a leadership team at Proco we always think first about what we are trying to achieve and how an opportunity fits with our vision. Then we ask whether we could do it organically. If we are clear on our reasons for proceeding, and know it’s our best option, then we move forward.
I think the best advice I could give anybody looking to merge, acquire or sell is don’t be a d**k. Do it for the right reasons, don’t waste yours or anybody else’s time, and don’t get sucked into the recruitment equivalent of Top Gun’s “your ego’s writing cheques that your body can’t cash”. Once you start being driven by that, you are starting a slow process of destroying any value you’ve created in your business to date.