The Global Market
The onset of the COVID-19 pandemic rattled the worldwide mortgage market. New lending volumes plummeted to record lows amid declining consumer sentiment, job losses, and nationwide lockdowns in many countries. However, new mortgage lending has remained on an upward trajectory since the second half of 2020. The total number of closed-end mortgage originations jumped from 8.3 million in 2019 to 13.6 million in 2020. That’s an increase of 65.2%. Regulators have kept interest rates at an all-time low. Even though interest rates could begin to tick up at some point, globally, the mortgage brokerage services market is expected to continue to see tremendous growth through the year 2027.READ MORE >>
The seller, Loudon County Rentals and Mini Storage has been the premier equipment rental destination for over 28 years in East Tennessee. Their extensive selection and dedication to providing the right tools and equipment their customers need to get the job done are above and beyond the industry standard.READ MORE >>
Business and professional services (BPS) firms are facing increased uncertainty amid the COVID-19 global pandemic. This climate is resulting in less investment and more reliance on revolving credit to maintain access to cash for operating expenses, and keeping priorities on payroll and workforce decisions. Companies with strong liquidity will shift to growth strategies and digital transformation. Also, with a greater need for mobility in a more remote-working world, there is a greater emphasis on cybersecurity, especially for government contractors and law firms.
Government Contracting: A Hot Market for Acquisitions
Government contracting is a significant moneymaker, especially in the United States. These firms rely on the needs of the government and the availability of financial resources for public investments. Government spending is often used to stimulate the economy during a slump. Through the first two quarters of 2020, government spending held steady, with health spending peaking along with the COVID-19 response, with billions going to national interest agencies and programs related to the pandemic.
The middle market in government contracting is comprised of several small, technically specialized service providers that offer high growth opportunities for larger companies that are seeking more capabilities and specific contract access. The pandemic slowed deal flow in the first half of 2020, but deals still happened with transactions expected to continue in the second half of the year. Private equity firms are seeking stable streams of cash flow and government contractors are relatively insulated from recession, making them a solid target for strategic investment and bolt-on acquisitions. M&A activity in the government contracting space is forecast to continue into 2021 as the sector (with the exception of aerospace) has been less impacted by the coronavirus and there is a need for more consolidation in the market.
Cybersecurity is paramount for government contractors for obvious national security reasons. In July of 2020, the U.S. Department of Defense issued the Cybersecurity Maturity Model Certification (CMMC) to build upon cybersecurity best practices from established industry standards with the goal of reducing cyber-risk among its contractors. Other departments of the government will likely do the same, prompting contractors to prepare for it in advance.
The big commercial tech companies typically draw the top tech and cybersecurity talent, making it challenging for government and its contractors to attract talent and offer competitive salaries. During times of increased unemployment due to a pandemic, many skilled workers are seeking out less risky positions. Government contractors should jump on this opportunity to attract young, tech savvy talent.
Law Firms: Challenges and Opportunities
Due to the pandemic, law firms have had to deal with furloughs, layoffs, pay cuts and reducing expenses while finding new ways to boost revenues while working remotely. Liquidity equals agility in uncertain times, so firms should seek to expand their credit lines while making the most of government assistance options.
Human capital remains the single biggest asset for law firms. Working remotely has brought about new challenges for attorneys and staff as they juggle the demands of working, parenting and caregiving. Investing in programs, technology, and other ways to support staff is more important than ever. Amid cutbacks and a lack of contact with colleagues, talent needs to know they are still valued and connected to the firm’s success. Firms also need to take this time to assess what lessons have been learned from remote working regarding obstacles, delays and infrastructure needs and how they can address needs, especially in regard to digital support.
Security and privacy are major issues for law firms operating remotely as they need their files and records to be accessible from outside the office. A digital security strategy is key even once the pandemic has passed, as no one knows for sure what the new normal will look like. Once security is implemented and established, focus can shift to maintaining client relationships and creating revenue growth into the future. Investment in mentoring programs and empowerment of staff can help grow the business and identify new opportunities to support the firm once the pandemic is over and the economy is ready to bounce back.
If you are thinking about a merger or acquisition for your business, please reach out to our M&A dream team at Benchmark International to discuss how we can help you accomplish great things.READ MORE >>
Catastrophe Cleaning & Restoration Co, Inc. (“CATCO”) has been acquired by Interstate Restoration. CATCO is a 50-person company that has operated for over 35 years providing highly-skilled restoration and remediation expertise to residential, commercial, public, and industrial customers.
Former owner Michael Hammack will continue as President as he helps transition the firm.
Michael Hammack, President of CATCO commented, “Benchmark International and Robert West were very professional, knowledgeable, extraordinarily helpful, and extremely encouraging during the sales process. Robert and his team ran a focused and competitive process resulting in a great cultural fit and financial outcome. CATCO looks forward to many years of success under the ownership of FirstService | Interstate Restoration.”
Interstate Restoration is an emergency response and general restoration contractor founded in 1998. With more than 50 locations spread across the US and Canada, they have a proven record of providing rapid disaster response in every corner of North America. Interstate is a subsidiary of FirstService Corporation (NASDAQ: FSV), a Canadian public property services company generating over $2B in annual revenue.
Tyrus O'Neill, Managing Partner at Benchmark International stated, “This was one of the more rewarding client relationships I have had the opportunity to build over my time with Benchmark International. Our team being intimately involved with Michael and his company through marketing, deal negotiation, and financial due diligence afforded us the opportunity to stitch together a deal that made tremendous sense for the client in both a cultural and financial context. He was able to monetize the great business he has built while also handing the keys over to an organization in Interstate that will genuinely carry on the legacy of CATCO as it continues to grow its presence.”READ MORE >>
Mergers and acquisitions in the global insurance industry carry their share of unique challenges. There is always the potential for increased regulation, and ever-changing technologies and infrastructures can make it expensive and difficult for companies to keep pace. When it comes to cross-border M&A, cultural integration is often overlooked. These factors make the world of M&A in the insurance sector complicated to navigate.
Key Drivers of M&A in the Insurance Industry
M&A activity in the global insurance sector becomes more dynamic as a result of several contributing factors and strategic objectives.
- Companies acknowledge the need for economies of scale and seek to expand by moving into global markets.
- Lower policy rates push industry players to consolidate to maintain profitability and find ways to remain competitive by uniting two synergistic companies and gain more value through scale efficiencies.
- Stagnant domestic markets result in cross-border targets.
- Organic growth cannot be relied upon to meet company goals.
- Heightened interest comes from a broad range of backers, from hedge funds to international investors.
- Low profitability results in low investment yields.
- Insurers need ways to spend large cash reserves.
- They need to integrate new technologies (such as mobile apps and big data) to revitalize flat business models, improve internal capabilities, reach customers, or gain market insights.
As with all M&A transactions, meticulous due diligence in the insurance industry is critical to a successful deal. While many due diligence topics for an insurance company overlap with that of all types of M&A transactions (property, tax records, employee issues, etc.), the insurance industry is subject to some unique scrutiny, such as:
- Regulatory issues (licensing, permitted practices, regulatory filings, and interactions with government agencies)
- Assessment and adequacy of reserves
- Structure of investment portfolio
- Underwriting and claims administration
- Market conduct and producers
- Reinsurance collectability
- Intercompany agreements
- Data security
- Compliance with privacy laws
Crafting of the purchase agreement in insurance M&A transactions is also an important part of the process. If done correctly, it will address both the unique nature of insurance companies and the regulatory environment in which they operate.
Indemnification provisions within insurance M&A agreements are similar to that of other industries, with exception of a few differences. An M&A transaction can call for unlimited indemnity protection for specific circumstances in which the buyer asks the seller to assume the risk. Common areas for specific indemnities include:
- Policyholder claims for extra-contractual obligations or claims that exceed policy limits
- Litigation specific to the insurance industry (i.e., class action policyholder lawsuits or regulatory actions for improper business conduct)
Cultural Integration in M&A
Global insurance executives have reported that overcoming cultural and organizational differences following a deal has been a significant challenge.
In order for cross-border M&A to be successful, leaders must look beyond financial motivations and consider how cultural integration can result in improved synergy and innovation. This can happen in several ways:
- The acquirer can completely assimilate the culture of the target company.
- The acquired company can maintain its own identity and independence.
- The two can meld, creating an entirely new culture.
The route a company chooses to take depends on the size of the two companies, the post-deal organizational structure, and the advantages generated by different cultural traits.
When companies carefully take culture into account, they can greatly benefit from the positive outcomes and lower the risk of failure in M&A. A cultural assessment should be conducted alongside due diligence far before the deal nears completion. This assessment should study the geographic locations, management styles, work habits, and attitudes of both companies. Successfully uniting employees from diverse backgrounds calls for a customized process that should not be rushed and includes clear and honest communication.
Steps for Success
When insurance companies are considering M&A for financial growth, geographic expansion, and bolstered competitiveness, there are certain steps that leadership should take to find the right type of deal and ensure a positive outcome.
- Assess the future of the industry, the trajectory of the business, and where the two align.
- Plan for different scenarios that could trigger economic changes in the next one to two years.
- Craft an M&A strategy that aligns with ownership’s goals.
- Choose target companies consistent with leadership’s overall strategy and long-term goals. What seems like a good idea today may not make sense for five to ten years down the road.
- Remain cognizant of the changing tax and regulatory environments.
- Evaluate in-house corporate development and overall integration abilities.
If you are ready to grow your company, sell your company, find a new investment opportunity, or plan your exit strategy for retirement, give us a call at Benchmark International. Our esteemed M&A advisors will craft strategies that deliver outstanding results for your plans for the future.READ MORE >>
Information Technology (IT) services encapsulate maintenance and security with regard toonsite and remote tech support,infrastructure, computers, servers, networks, workstations,firewalls, cloud services, web development, systems integration, telecom, patch management, software updates, big data, and virus and malware prevention.READ MORE >>
Facility services providers deliver a wide array of outsourced support functions to commercial, industrial, multifamily and residential facilities, including:
- Janitorial, sanitation, and general maintenance and repair
- Mechanical, electrical, HVAC and plumbing
- Fire and safety
- Disaster recovery
- Sign and lighting
- Parking lot maintenance, lighting, and snow management
- Pest control
Driving the Demand
This several-hundred-billion-dollar global market is largely driven by commercial construction projects, a focus on reducing building operating costs, and outsourced facility management operations.
Heightened commercial construction activity galvanizes the necessity for facility support services because commercial premises require constant upkeep, repair, surveillance and cleaning. Increases in these construction and renovation projects are stimulated by:
- Strong levels of consumer and business confidence
- The need for rebuilding following natural disasters
- Increased corporate investment in capital expenditures
- Low interest rates
Any sustained action within these types of projects creates a favorable M&A environment for facility services providers.
Regulatory organizations also prompt the need for outsourcing of facility support services, as companies must deal with pressure regarding workplace health and safety protections and environmental regulations. These particular liabilities are why some facility services providers also offer value-added services such as risk management and labor law supervision.
The facility services sector has a history of drawing the attention of private equity, as investors seek asset-light business models with recurring revenue and add-on acquisitions. Additionally, large public companies continue to drive consolidation in their end markets. Because this industry is so fragmented, there is ample opportunity for strategic and cross-border acquisitions that lead to expanded geographic presences and broader product offerings.
In this particular commercial services industry, there has been a tendency for certain acquirers to buy up several companies over the course of a shorter timeframe, most often in the testing, inspection, and certification segment. It has not been uncommon for one company to acquire more than five companies within one year. These types of serial buyers have developed a very streamlined approach to the M&A process, from evaluation to integration. Because of this, investors see these strategies as a steady source of growth, prompting companies to actively seek numerous incremental acquisitions.
Due Diligence and Acquisition Platforms
Because the M&A environment in the facility services market is very competitive and there is a prevalence of serial acquisitions, up-front due diligence is key to seeing a deal through to success. Aggressive buyers are able to gain an edge by conducting more of their due diligence prior to the formal launch of the deal process. This also aids in speeding up the endeavor.
An important element of the due diligence process for serious buyers in the facility services industry is the viability of the target company to serve as a platform for subsequent acquisitions. Many buyers view this ability as a mandatory feature of a deal. The prospect of future add-on acquisitions allows buyers to lower the overall acquisition multiple and get a better return on capital. This makes it a critical part of the due diligence process.
As the Internet of Things prompts transformation within all industries, the facility services sector has seen a shift towards software-based technologies.
- Digital facility maintenance platforms have improved the efficiency of processing work orders and enable more effective cross-organizational communication.
- Innovative technologies are being implemented to reduce maintenance costs, avoid expensive failures, and extend the life of equipment.
- The use of data systems enables providers to help clients reduce costs and energy consumption.
- Online systems make labor markets more flexible, improving productivity through on-demand workforces.
- Digitization enhances compliance with regulations regarding safety, zoning codes and financial transparency.
As interest in facility software platforms and support solutions continues to grow, so does investor interest.
Is your company ready for the next step? Set up a chat with one of our M&A experts at Benchmark International and we can discuss growth strategies, exit planning, or the partial or complete sale of your business. Our exclusive processes and global connections make our approach to M&A unique, which is why our clients love working with us.READ MORE >>
The engineering services sector is made up of Engineering Services Outsourcing (ESO) firms or Engineering Service Providers (ESPs) that specialize in planning, design, and technical work at each stage of a product lifecycle. ESO is commonly used by industries such as construction, automotive, telecom, energy, transportation, pharmaceuticals, and manufacturing. Among the services offered by ESO that are consistently in high demand are structural, architectural, civil, and electrical engineering.
Industry Growth Drivers
Growth in the engineering services industry is stimulated by circumstances that include:
- Increasing technical complexities regarding product development and manufacturing
- A need to reduce costs
- Shorter product lifecycles
- Demand for innovation
- Increasing tie-ups between ESPs and Original Equipment Manufacturers (OEMs)
The Demand for ESO
As clients demand more complex solutions and shorter product lifecycles, there is a growing need for the use of subcontractors through ESO. Shorter duration solutions result in renewed managed service contracts, helping ESO businesses to do well. Additionally, some engineering companies opt to use ESO as an extension of their own capabilities.
Other reasons that companies choose to use ESO include:
- Access to more cutting-edge technologies and more complex engineering services
- The ability to focus time and resources on other critical tasks such as marketing
- Need for less office space and lower office equipment costs
- Faster project turnaround that can result in improved client satisfaction
- Access to services on an as-needed basis
- Around the clock support services
ESO demand is also affected by the specific needs of individual industry sectors.
- ESO in consumer electronics is driven by consumer demand for enhanced mobility and entertainment, and the better exchange of information between devices for data and media.
- Both onshore and offshore ESO is used in the automotive segment in developing countries due to their high demand for passenger vehicles and economical cars. Demands in developed countries include car connectivity, advanced driver assistance, Vehicle-to-Vehicle (V2V) and Vehicle-to-Infrastructure (V2I) communication.
- Tech companies, OEMs and semiconductor companies look to ESO for assistance in developing next-generation smart devices. These businesses also employ ESO to stay competitive by focusing on product localization needs, new features, and industry best practices.
- The telecom industry accounts for a major share of ESO revenue as global telecom companies continue to expand their market presence around the world.
Adapting to the Tech Era
In today’s digital world, engineering services companies must adapt their business models to focus on emerging technologies and their integration with manufacturing and engineering services. This adaptation is crucial to realize the full potential of these growth opportunities. These technologies include data, sensors, the Internet of Things, embedded electronics, Machine-to-Machine adoption, and other digital transformative solutions.
The Need for M&A
As delivery methods for engineering services continue to change, engineering firms must either look to acquire new technologies, or diversify into higher value advisory services and focus on forming strong client relationships. Mergers and acquisitions are a resourceful path to establishing these services in a highly competitive market.
M&A strategies are also vital to creating growth and uncovering new strategic pathways. Larger companies look to acquire smaller companies in order to remain relevant, close talent gaps, expand to new regions, and strengthen their portfolio of offerings. This increased consolidation results in the prevalence of more one-stop service providers.
Because larger engineering services firms have more developed infrastructure and economies of scale, they are able to easily outbid smaller firms. This makes it problematic for the smaller firms that are trying to keep up and stay profitable. As a result of such challenges, many small engineering services companies are forced to rethink their options and consider partnership with larger firms through acquisitions.
M&A as a Succession Solution
Additionally, private engineering services companies may face succession issues because they typically have one or two founders who eventually plan to retire. When these particular business owners choose to exit the company, in many cases the next generation either cannot afford to buy out its departing leaders or is unwilling to do so. In these situations, M&A transactions are an ideal way for middle-market leadership to solve succession-planning issues, form a strong exit strategy, and set up the future trajectory for the company.
Please reach out to our cross-border M&A specialists at Benchmark International to start the conversation about selling your business or devising your exit strategy. We can offer unique perspectives, services and tools that work in concert to arrange a deal that delivers on your every aspiration. We think you will like what we bring to the table.READ MORE >>
The global information services (IS) industry employs integrated methods to gather, process, communicate and store different types of information for the purpose of improving efficiencies for society and organizations. IS data—which typically covers people, software, hardware and procedures—is used for study, analysis and better decision-making processes.
The IS landscape is comprised of companies that vary in size, including:
- Global multi-billion-dollar firms that cover several sectors
- Firms with hundreds of million of dollars in revenues and more concentrated areas of focus
- Smaller firms that focus on niche markets and specific geographic regions
M&A in the IS Industry
Many large IS companies use regular acquisitions to execute business strategies such as product enhancement, geographic expansion, keeping pace with changing marketplaces, and expansion into adjacent markets. Acquisitions in this sector can also serve as an alternative path to product development, allowing companies to purchase capabilities and content rather than create it themselves. IS companies typically look to acquire content that fits well within their existing offerings.
Synergy and Value
Value through M&A in this industry comes in the form of clear synergies and improved distribution capabilities. This is partially due to the fact that IS content can be used several times at no added cost. After a one-time integration of content and capabilities between the two companies, there is much versatility in how the content can be used. Synergies are especially important to M&A deals when they are part of a business owner’s exit strategy in order to maximize the value of the transaction and fulfill the business owner’s personal objectives and vision for the company.
Consolidation planning is key to company valuations. IS companies do not typically view acquisition targets as stand-alone enterprises, but rather as opportunities to consolidate acquired content into existing platforms, therefore gaining positive revenue, improved cost synergy, and reduced technology costs.IS transactions can happen at a higher price if earnings and product synergies can be pinpointed and their profitability is clearly identified.
Active IS Market Segments
In the IS industry, mergers and acquisitions activity tends to occur most in the following segments:
- Business Intelligence
- Financial Markets Information
- Legal, Tax & Regulatory Information
- Credit & Risk Management Information
- Marketing Information
Business Intelligence IS
The Business Intelligence segment of IS—defined as information on industries, products and services that help companies identify market opportunities, respond to competition, and plan new products—is a highly active area for M&A. These companies use acquisitions to increase their existing coverage and expand into adjacent markets.
Financial Markets IS
In the segment of Financial Market Information, acquisitions frequently focus on adding content and capabilities to their distribution platforms to serve large portions of rapidly changing financial markets. New data is always in demand and new types of analyses are needed. Companies seek innovation, new customers, and stronger financial market data versus that of their competition.
Legal, Tax & Regulatory IS
The area of Legal, Tax & Regulatory Information is subject to ever-changing laws and regulations around the world. Also, IS companies face added regulations with the expansion of cross-border trade. To adapt to the need for product changes, these firms turn to acquisitions to expand content and capabilities.
Credit & Risk Management IS
In this particular IS segment, it is most common to see specialized firms being active in M&A transactions, with their primary strategy being to obtain more individual credit content. Also, as new entrants emerge in this space, the major credit ratings agencies see buying them as a way to strengthen their existing credit rating models.
Marketing IS companies provide market research, audience management and other general marketing services. Companies in this diverse area use acquisitions for market consolidation, increased synergies, and the expanded mix of tools and information.
The Importance of Expert Guidance
As with any industry, it is recommended that business owners within the IS space engage the expertise of reputable M&A advisors to execute a deal in a sector that is subject to fast growth and high margins. These deals involve high levels of complexity and require the perspectives and resources of a partner that is committed to serving the best interests of the seller.
Choosing to sell your company is a big step. At Benchmark International, we understand what a life-changing decision it is. Our M&A experts are here to walk you through the process and provide the utmost peace of mind every step of the way. Give us a call so that we can embark on this exciting journey together.READ MORE >>
Various types of businesses and organizations engage the services of contract catering companies to provide daily or regular meal program services. The sectors that are the primary consumers in this growing industry include:
- Business & industry: Large corporations providing meals to their employees in the workplace (accounts for one third of the market)
- Education: Schools, universities and institutions
- Healthcare: Hospitals and senior care facilities
- Sports & Leisure: Public attractions such as sports venues and museums
- Travel: Inflight and airport lounge services
The global contract catering industry and food service contractor market is forecasted to surpass $601.9 billion by 2026.
In order to differentiate themselves and maintain a competitive advantage, the leading vendors in the global contract catering market commonly employ tactics such as the following offerings:
- Flexible service models that leverage on-demand online systems
- Limited-time menu offerings
- Value add-ons such as employee support, training, and guaranteed service-level agreements
- Use of predictive analytics to improve operational efficiencies and reduce waste
- Unique options that enhance experiences and provide “eatertainment”
- Innovative menus that cater to the evolving tastes of emerging middle-aged audiences
- Creative promotional items
Types of Contracts
Catering contracts are subject to a multitude of circumstances and can fall under one of several types, based on the level of the organization’s requirements, policies, financial risks, potential profits or losses, and other factors:
- Fee-based/cost plus/cost-plus guarantee
- Nil subsidy/cost
- Profit and loss
- Fixed price/cost/subsidy
- Fixed cost per head
Tech-Driven Meal Services: Home meal subscription and online food catering services have permeated all areas of the market. This includes manufacturers who have needed to adapt in order to offer fresh food subscription services. People want quick and healthy eating with the added perks of personalization, convenience, and unique choices of cuisines. Food operations need to be more flexible to serve these needs. Vendors need to seek logistics partners to accommodate delivery. As these services rise in popularity and increase in number, there is a growing opportunity for mergers and acquisitions in this space.Health Focus: Emphasis on health and wellbeing has created massive growth opportunities for the global catering sector, driven by the demands of businesses, hospitals, schools, and aging care facilities. These types of clients increasingly seek healthier choices and higher nutrient quality, and meals with certain characteristics such as low sugar or easy digestibility. This shift has reinvented the kinds of expectations placed on contract caterers.
Sustainability: A major factor playing into the dynamics of the catering market is a growing demand for sustainability. Contract caterers must find ways to accommodate clients who are becoming more and more concerned about sustainability and environmental issues. The availability of seasonal and local food, organic and vegetarian options, and fair trade are influencing the catering landscape. Creation of new endeavors that ensure ethical responsibility and resource management continue to drive growth in this market.
M&A Scenarios: Consolidation in this market is frequent as the dominant industry players continually seek to expand their brand and global presence, and diversify their services. This also raises the level of competition for M&A transactions. Key priorities include integration of facility services, and customization and personalization, all with the intent of attracting new clientele. There are also slews of contract catering businesses of all sizes around the world, and they are offering products and services that enhance their differentiation, and this creates a market brimming with choices for buyers in this industry.
Another scenario in this industry that can arise after a company is acquired is that some clients prefer having a relationship with a smaller, independent caterer. They do not wish to be “just another number” to a large catering firm. This creates great business opportunities for the niche players, especially as the other small boutique caterers are being bought up and disappearing. This particular environment also creates the potential for catering business leaders to exit their existing companies and create new independent ventures.
Entry Challenges: There are several barriers to market entry that caterers face when trying to establish a new business. These factors include the growing cost of operations due to food price inflation, regulation, rising labor costs, the need for more technology, and changing contractual relationships.
The M&A specialists at Benchmark International would love to discuss the sale of your company with you. At your convenience, set up a call with one of our analysts and we can talk about growth and exit strategy options that align with your plans for your future and retirement.
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When companies seek to enhance their margins and better serve their customers while reducing the cost of providing services, they outsource non-revenue producing functions to outside business services providers, known as business process outsourcing (BPO) companies. In the area of recruiting, it is a form of BPO, commonly referred to as Recruitment Process Outsourcing (RPO).
The business process outsourcing industry is valued at nearly $1 trillion USD. The United States leads the market with 40% share worth more than $400 billion, followed by Europe and the Middle East with a market valued at $300 billion. The global RPO market is valued at around $5 billion.
Technology has greatly expanded the capabilities in this sector, as it is not uncommon for companies to have virtual contact centers where employees work from their homes, or to have offshore centers where support staff works from another country or continent. It is less efficient for companies to have functions performed in-house that require overhead costs. This is a major driver of growth in the BPO industry and represents a relatively still-untapped opportunity in many countries that use little outsourcing.
There are also several other benefits that companies gain by outsourcing services.
- It frees up the time and energy of internal resources to focus on bigger picture strategic goals.
- There is no time or cost associated with training new staff members.
- It offers access to regulatory experts to ensure compliance in an increasingly regulated world.
- There is no employer liability.
- Administrative services can be paid for when they are needed, as opposed to employing someone full time and having them be under-utilized.
- The interviewing and hiring processes can be avoided, saving additional time and money.
- Employers do not need to pay benefits, leave or holidays for outsourced staff.
- It also opens up the opportunity for smaller companies to carve out more market share by increasing their global reach.
Office Administration Outsourcing
A large and growing segment of this outsourcing is office administration. Essentially any company in operation has administrative tasks that must be accomplished to keep the day-to-day operations running smoothly. Administrative functions that are often outsourced include payroll, accounting, human resources, data management, employee benefits, insurance claims management, and client support.
RPO companies emerged from traditional recruiting needs, but are designed to work differently. All or part of a company’s recruitment processes is assigned to an external service provider. RPO services differ from that of staffing companies in that they do not simply find candidates to fill job openings. They focus on the overall improvement of a company’s recruiting process as more of a strategic, consultative partner. They study factors such as turnover rates, technology, scalability, and how much time it takes to fill a position.
Many companies choose RPOs to improve recruitment efficiency, reduce cost, make hiring more scalable, improve the quality of hires, meet the talent needs of short-term projects, and improve workforce analytics and planning.
The industry sectors with the largest market shares are technology, telecom, finance, insurance, healthcare, biotech, pharmaceuticals, and medical equipment.
BPO M&A Activity
As the use of BPO services becomes more common around the world, the M&A activity surrounding them increases, with a large concentration in the middle market. There is a tendency for customers to prefer fewer vendors with more diverse service offerings, motivating BPOs to use M&A to diversify to increase customer wallet share.
In this highly competitive market, BPO companies typically acquire target companies in order to gain:
- More capabilities for broader service offerings
- Exposure to higher growth end-market verticals
- Broader geographic reach to offer more global services
- Economies of scale to lower proportion of fixed costs
RPO M&A Activity
RPO companies are becoming increasingly globalized as a result of mergers and acquisitions. To be successful in this growing market, RPO providers have found different ways to distinguish themselves.
- They specialize across geographic regions, vertical markets, related jobs, and buyer segments.
- They offer value-added and technology-based services, such as analytics and mobile recruiting.
For an M&A deal to be successful, sellers should conduct an all-encompassing assessment of their value proposition and how it ultimately aligns with the buyers’ interests.
M&A Due Diligence
Conducting due diligence for a merger or acquisition is always a time-consuming undertaking, and this is especially true when the target is a BPO company. Location analysis of the target company should be performed for any potential acquisition to help form an accurate purchase price and avoid costly post-closing issues. It assesses site location, economic development, competition, real estate markets, workforce issues, saturation levels, historical attrition rates, recruitment, and retention viability. Partnering with a specialty company broker who has this type of experience is advised.
If you are ready to take the next step with your business, whether it is selling, expanding, or retiring, contact our M&A specialists today. Our expertise, global connections, and proprietary technologies are here to guide you to a prosperous future.READ MORE >>
The global corporate training market is projected to grow at a compound annual rate of 9.8% and reach $114 billion by 2022, according to industry experts. Furthermore, a combination of economic, regulatory, demographic and technological forces is reshaping the labour market and forcing employers to increase the speed and efficiency with which they train employees. Meanwhile, ongoing changes in how people consume information and engage with educational content have unlocked new opportunities for innovative training companies to significantly enhance the learning experience. These factors have led to a strong interest in training firms, with much of the interest over the last few years coming from players outside the industry, who wouldn’t traditionally be linked with training.
Some of the high-profile acquisitions coming from adjacent markets include recruitment companies looking to use training as a way to strengthen the marketability of their talent pools and help employers bridge the skills gap. For example, in May 2018, Adecco Group announced it was acquiring General Assembly, which provides courses in web development, coding, and other digital skills. A few years earlier, LinkedIn enhanced its training capabilities by acquiring Lynda.com, an online education company. Penn Foster also partnered with EmployBridge, a large commercial recruitment company, to provide online courses to EmployBridge employees for free.
Furthermore, several factors over the last decade have given employer-sponsored training an increased share in the market. The most significant is that the ever-shortening technology is cycle is accelerating the rate in which certain skills become obsolete. As a result, employers are being driven to make investments in hiring, training, and re-training qualified workers. Increasing regulations and changes to the policy are contributing to the industry, increasing demand for regulatory and compliance monitoring training.
Key Industry Trends
· eLearning: The increasing use of eLearning has grown to become a multi-billion-dollar market. Factors that have contributed to growth in eLearning include the rising costs of instructor-led, classroom-based training as well as the need for continuous, life-long learning. Awareness and compliance training were two of the first to use eLearning, however sophisticated platforms have made even soft skills training a practical reality for this approach. Add to that the potential for significant cost savings, and it’s not difficult to predict the continued expansion of eLearning for years to come.
· Training being used to attract and retain employees: Training is increasingly being viewed as an employee incentive, along with perks such as healthcare and retirement benefits. Employees appreciate that access to training will help them hone their skillset – as well as developing new skills. This also helps businesses retain employees, a recent poll found that more than half of all currently employed adults are either actively searching for a new job or are at least passively entertaining other career opportunities. Using training is a way to help develop your employees while keeping them engaged and productive.
· Skill gaps continue to grow: According to a report by Payscale Research, 33% of employers had positions open for over six months due to a lack of skilled or qualified candidates. As such, companies must take it upon themselves to provide future employees with the training and development opportunities to meet the demand of the role.
· Convenience: With the ever-increasing rise of technology, more people are demanding that training is easily accessible. They expect learning to happen at any time, in any place. As the vast majority of people use smart phones, this means they don’t have to wait to access training.
· Personalisation: Off-the-shelf training programs are on a rapid decline, employees expect training to be relevant to their unique situation. This means adapting content based on factors such as work environment, the culture within the organisation, employee experience, location, and job performance. With eLearning, there is cause for optimism and excitement in the industry that customised training will become the norm. While training improves, so will company performance.
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