M&A in the UK recruitment sector: Q2 2025
Unlocking value through strategic plays amid market volatility
9
deals completed
in Q2 2025
78%
of transactions were trade deals
22%
of deals were in the engineering and construction sector
Our view of the market
Q2 2025 deal activity in the recruitment sector declined to nine deals, continuing the slow downward trend year-to-date. This reduction reflects a cautious sentiment among business owners and buyers amid widespread uncertainty underpinned by fluctuating business confidence, elevated employment costs and geopolitical tensions.
Despite this ongoing subdued activity in UK M&A markets, increased pressure on private equity to invest and improving macroeconomic conditions suggest a potential M&A rebound in the latter half of 2025. The reduced deal flow this year may allow well-positioned market leaders to secure premium valuations.
Number of deals
Recruitment deals by sector
Sector distribution has been relatively even, with no single sector dominating deal activity. Whilst investor interest remains focused on specialist recruiters, generalist recruiters consistently continue to attract both trade and private equity buyers for a range of strategic reasons.
Spotlight on the generalist sector
- Private equity-led buy-and-build strategies remain a core theme, with investors acquiring generalist platforms and adding niche bolt-ons to create an integrated, one-stop-shop recruitment solution.
- Typically, generalist firms trade at lower multiples than the niche recruiters, largely due to perceived weaker pricing power, lower margins and their services being more highly commoditised in the market. However, this also creates entry points for strategic buyers seeking to scale efficiently.
- Despite lower valuations than their specialist counterparts, sector diversification means generalist recruiters are less exposed to shocks in any single sector. This means earnings are more predictable and acquisitions are less risky, hence more consistent M&A activity quarter-to-quarter.
- We expect continued activity in this sector, particularly among firms with robust financial profiles, consistent performance and scalable operational models. These characteristics are likely to make them attractive acquisition targets.
Deals by sector
Deals by class
Private equity interest has dropped to 22% – the average over the last twelve months. This drop suggests a stabilising sentiment among private equity houses, which are continuing to adopt a more selective investment approach. This reduced activity also adds pressure on private equity houses to deploy capital, with many opting to run continuation funds rather than pursue new acquisitions. Unless compelling opportunities arise, this trend is likely to persist, with private equity activity expected to remain in the 20-25% range.
Listed company valuation multiples
Q2 EV/EBITDA multiples have remained broadly consistent with prior quarters, with the mean increasing slightly to 10.63x from 10.51x in Q1. The median multiple fell slightly to 9.47x and the interquartile range narrowed significantly, indicating more consistent investor expectations across the core set of companies. However, volatility remains elevated with a notable increase in the upper-end error margins pointing to growing divergence between stand-out performers and the rest of the market.
Deal highlight
In June 2025, AIM-listed Hercules (HERC) acquired Advantage NRG to expand its footprint in the construction and engineering sector, specifically targeting the high-growth UK power and energy market. The deal, which could reach a total consideration of £15.7 million, implies an EV/EBTIDA multiple of 9.24x based on a reported EBITDA of £1.7 million.
Already a supplier to the broader infrastructure industry, Hercules’ acquisition is a strategic move to capitalise on rising labour demand driven by the UK’s £58 billion National Grid investment plan. The plan, aimed at overhauling the country’s electricity transmission infrastructure to support a projected 64% increase in electricity demand by 2035, has created a surge in workforce requirements across the sector. This acquisition positions Hercules to benefit from that demand and strengthens its role in one of the most investment-intensive segments of UK infrastructure.
This aligns with our Q1 outlook identifying the construction and engineering recruitment sector as one in which we expect sustained elevated M&A activity due to ongoing large-scale infrastructure investment, growing vacancy volumes and scarcity of skilled workers in the UK.
Methodology
The data of this report has been sourced from Pitchbook and only includes deals where the acquisition target is UK based.
Please reach out directly for further information about the findings of this report or its methodology.
