A recruitment business is a collection of relationships held by individuals who can resign on a month's notice and take their billings with them. Every buyer knows this. It is why the structure of a recruitment transaction looks different from almost any other sale, and why the seller's central task between signing an engagement and receiving the final payment is holding the team together.
That is not a reason to be pessimistic about price. Agencies sell regularly and well. It is a reason to understand from the outset that in this sector the deal is built around people risk rather than around a valuation debate, and that the preparation which matters most is the preparation that reduces that risk visibly.
This article sets out what buyers actually value in a recruitment business, why permanent and contract work are priced differently, how consultant dependency is measured and mitigated, and what an owner should fix in the year before going to market.
The first correction most owners need is that revenue is close to meaningless in this sector.
In temporary and contract staffing, most of what passes through the top line is the contractor's own pay, which the agency collects and pays out. The number that describes the business is net fee income — gross profit, the margin retained after paying the worker. A contract desk billing large volumes at thin margins and a permanent desk billing a fraction of that in headline revenue can produce identical NFI, and buyers value them from that same base.
So the first document to prepare is an NFI analysis, three years, monthly, broken down by discipline or desk, by client, by consultant and by placement type. Not revenue. Not headline fees. Net fee income, reconciled to the accounts.
The market context is worth knowing while doing it. Private employment agencies placed around 61 million people worldwide in 2024, close to a million more than the year before, even as industry revenues fell by roughly four per cent. Volume and value move separately in this sector, and buyers underwrite the margin, not the activity.
A blended agency is not valued on an average. It is valued as a weighted combination of businesses with different risk profiles.
Permanent placement is high margin and entirely non-recurring. Every month starts at zero, the revenue is cyclical, and it carries rebate exposure: if a placed candidate leaves within the guarantee period, the fee is repaid in whole or part. Buyers look at rebate history as a quality measure, and a rising rebate rate is read as a fall in placement quality.
Temporary and contract work produces a lower margin per placement but a visible run rate. The book of live contractors, their average tenure, extension rates and remaining contract terms is the closest thing to recurring revenue that this sector offers, and it is priced accordingly. It also consumes working capital, because the agency pays the contractor before the client pays the agency.
Retained and executive search sits differently again: fewer, larger fees, more owner involvement, more sensitivity to who does the work.
The practical point is presentation. Show NFI split by type, show the contract book with tenure and expiry, show the rebate history, and let the buyer weight the parts rather than discounting the whole. Sellers who present a single blended figure invite the buyer to price it as though it were all perm.
This is the risk that determines the shape of the deal, and it is measured precisely.
Buyers ask for NFI per consultant for three years, the share of total NFI produced by the top one, three and five billers, tenure by consultant, and the ramp profile of recent hires. They then model what happens if the largest billers leave, because in this sector that scenario is not hypothetical.
Two related questions follow. Are the client relationships institutional or personal — does the client call the agency or a named individual? And is the delivery capability transferable — does the business have a database, a process and a brand that produce placements, or does it have four people who know people?
The remedies are structural rather than rhetorical. Team-based account handling so that clients meet more than one face. Documented processes and a CRM that actually holds the relationship history. A billing profile where no individual dominates. And a genuine second tier of consultants who are billing, not just learning.
In our experience at Conclave Partners, the agencies that transact best are those where the top biller is not the owner and no consultant exceeds a modest share of total NFI — and where that has been true for long enough to appear in the data rather than in a promise.
Every owner believes their contracts protect them. Diligence frequently finds otherwise.
The first problem is administrative: employment contracts that were never signed, or were signed years ago before promotions, or that no longer reflect what the person actually does. The second is drafting: covenants so broad they are unlikely to be enforced, or so narrow they prevent nothing. The third is jurisdictional: enforceability of non-compete and non-solicitation clauses varies considerably between European countries, and in several of them a restraint is only enforceable if it is reasonable in scope, duration and geography — and sometimes only if it is paid for.
What buyers look for is a coherent set: signed, current, proportionate, with sensible notice periods, garden leave provisions that allow a departing consultant to be kept away from clients during the notice period, and non-solicitation of both clients and candidates rather than a blanket non-compete that a court would strike out.
But the honest position is that covenants slow departures rather than prevent them. The real retention tool is economic and cultural, which is why buyers spend as much time on commission schemes, career structure and the second tier as they do on the contract file.
Confidentiality in recruitment is harder than in almost any other sector, because your competitors are professional recruiters and your staff are professionally recruitable.
Plan the information sequence before the process starts. Decide who needs to know, at what point, and what they are told. In most transactions the answer is: as few people as possible until heads of terms, then a small group under NDA, then the wider team at or near completion.
Where key people must be told early — because the buyer wants to meet them, and they usually do — the conversation should come with something concrete: a retention arrangement, an equity or bonus participation, clarity about their role after completion. Telling a top biller that the business is being sold and offering nothing is the fastest way to lose them mid-process.
Retention packages are normally structured across the transaction and the earn-out period, sometimes funded by the seller from proceeds and sometimes by the buyer. Either way, they should be agreed before the buyer meets the team, not negotiated afterwards under time pressure.
And prepare for the leak. In a market where competitors call your consultants routinely, assume the news will travel and have an answer ready that is true, brief and consistent across everyone who might be asked.
Two documents carry more value than owners expect, and both are usually in poor condition.
The first is the client terms of business. Are they signed by each client, current, and do they contain enforceable fee, rebate and introduction terms? Unsigned terms mean fee disputes, and a buyer reads a file of unsigned terms as revenue at risk.
The second is the candidate database. In the EU this is a data protection question as much as a commercial one: what personal data is held, on what lawful basis, with what retention period, and what happens to it on a transfer. A database assembled without a defensible basis is not the asset the seller thinks it is, and post-transfer it becomes the buyer's liability. Increasingly buyers ask directly about consent records, retention policies and deletion practice.
Alongside those, expect questions about CRM hygiene: how much of the relationship history is actually in the system rather than in an individual's inbox, and whether candidate and client ownership is properly recorded. A business whose knowledge lives in personal networks and personal accounts is, in diligence terms, a business whose knowledge can walk out.
Temporary and contract desks are cash-hungry, and the funding structure is part of the transaction.
The agency pays contractors weekly or monthly while clients pay on their own terms, so the book is financed either from cash or through invoice discounting or factoring. Buyers examine the facility, its covenants, whether it is with recourse, what happens to it on a change of control, and what the real debtor days are once disputed and aged invoices are stripped out.
The working capital mechanism at completion deserves close attention, because in a contract-heavy business the normal level is large relative to the price and small definitional differences move real money. A seller who arrives with a documented monthly analysis of debtors, accrued income and contractor accruals is in a much stronger position than one who leaves the definition to the buyer's model.
Diligence in this sector goes to places general buyers do not expect.
The classification of contractors is the largest single exposure: whether individuals engaged as self-employed or through intermediary companies should have been treated as employees, and who carries the historic liability if a reclassification occurs. The answer varies by country and by arrangement, and it is one of the few areas in recruitment where a single finding can exceed a year's profit.
Beyond that: equal treatment rules for agency workers where they apply, right-to-work verification records, working time and rest break compliance for placed workers, sector licensing where it exists, and the terms on which any umbrella or payroll intermediary is used. Buyers will also want the file on any current or recent employment claims, from placed workers as well as internal staff.
None of this is difficult to prepare in advance. All of it is expensive to discover after heads of terms are signed.
Larger staffing groups buy for sector specialism, geography or a client list they cannot reach. They understand the economics immediately and they price consultant risk without being asked.
Private equity is active in the sector, typically backing platforms and then acquiring specialist agencies around them. They will want management continuity, a credible second tier and a data room that survives scrutiny.
International groups entering a market buy local businesses as a bridgehead, and can pay well for a strong position in a discipline they lack.
Management buyouts work well in recruitment, because the people who generate the value are already inside the business and funding can sometimes be structured against the contract book.
Which of these pays most depends less on scale than on overlap of discipline and geography, and establishing that before any approach is where Conclave Partners begins a recruitment mandate.
Expect a significant portion of the consideration to be deferred and linked to performance over two or three years. In a business whose assets go home every evening, that is not a lack of confidence in your company; it is the only structure most buyers will accept.
What matters is the detail. On what measure is the earn-out calculated — NFI or EBITDA — and who controls the costs that sit between them? What happens if the buyer restructures, merges desks, or moves the business onto their systems? Are you protected against decisions that reduce measured performance for reasons unrelated to you? Is there a catch-up mechanism if one year underperforms and the next exceeds?
Sellers focus on the headline multiple and then discover that the earn-out definition was where the value actually sat. The measurement clauses deserve more negotiating energy than the multiple does.
Build the NFI analysis by desk, client, consultant and placement type, three years, monthly, reconciled to the accounts.
Reduce single-consultant concentration deliberately, by moving accounts onto teams and building the second tier, and let a full year of billing data show the change.
Get the employment contracts signed, current and proportionate, with garden leave and non-solicitation provisions drafted to be enforceable in the relevant jurisdiction rather than merely aggressive.
Get client terms of business signed and current, with clear fee, rebate and introduction terms.
Put the candidate database on a defensible data protection footing: lawful basis, retention policy, deletion practice, records.
Review contractor engagement models and take advice on classification exposure before a buyer's adviser does it for you.
Clean the CRM so that relationship history sits in the system rather than in individual inboxes.
Normalise the accounts honestly, including a market salary for the owner's own billing and management work. Adjustments a buyer can verify are accepted; adjustments supported only by the owner's word cause the buyer to discount the whole earnings figure. Sellers who ask Conclave Partners where to start are pointed at the NFI-by-consultant analysis and the contract file, because those two documents determine both the price and the shape of the earn-out.
A prepared recruitment business typically takes six to nine months from launch to completion. Diligence is quicker than in asset-heavy sectors, but the people work — retention conversations, buyer meetings with key staff, earn-out negotiation — takes longer than owners expect.
Time the process against the trading cycle. Launching into a strong quarter with a full contract book is materially better than launching into the summer with a thin perm pipeline, because the run rate at diligence is what the buyer extrapolates.
Expect the buyer to want to meet the top billers before completion, and expect their answers to matter. At Conclave Partners we prepare those meetings carefully, because they are where a good process is most often won or lost.
On adjusted EBITDA, with the multiple driven by the mix of permanent and contract work, the durability of the contract book, and how concentrated the billings are among individual consultants. Net fee income rather than revenue is the base from which everything is analysed, and a large part of the consideration is normally deferred.
Not necessarily more per unit of margin, but it is priced with more confidence, because live contractors with remaining terms are visible forward revenue. A perm desk of the same NFI carries higher cyclicality and rebate risk, so buyers weight the two differently rather than averaging them.
It changes the price, and in the worst case it ends the process. That is precisely why retention arrangements should be agreed before key people are introduced to a buyer, and why reducing concentration in the year before a sale is the most valuable preparation available.
They slow departures and make solicitation of clients and candidates riskier, but enforceability varies by jurisdiction and depends on the clauses being reasonable in scope and duration. Signed, current, proportionate contracts with garden leave provisions are worth having. They are not a substitute for a business where no single person carries too much of the billing.
Yes, indirectly but materially. A database held without a defensible lawful basis, retention policy and deletion practice transfers a liability to the buyer along with the asset, and buyers increasingly ask about it directly. Putting the data position in order is inexpensive and removes a discount.
Around six to nine months from launch to completion for a prepared business. The preparation that determines the price — spreading billings, fixing contracts, cleaning the database and building the NFI analysis — needs a further twelve months to show in the data rather than in the plan.
Ildar Zakirov — Conclave Partners ildar@conclavepartners.com
Sergi Kosiakof — Conclave Partners sergi@conclavepartners.com