RPO Acquisitions Improve Geo Reach, Economies of Scale and Overall Delivery Value

My July 22 blog focused on partnerships between RPO providers to improve multi-geo and global RPO capabilities in order to serve the needs of buyers looking for recruiting support beyond domestic regions and to boost their own revenue growth. 

And as we identified in our May 2009 Targeting Recruitment Process Outsourcing report, a growing number of providers in the RPO space are taking the acquisition route to gain the same benefits for themselves and their clients. In fact, 40 percent of all RPO providers have acquired another company, and 28 percent have completed an acquisition in the past two years.

The most recent example was yesterday’s announcement of The RightThing acquiring Capital H Group’s RPO division, based in Milwaukee, to expand its geographical reach in the upper mid-west region of the U.S. Others include Kenexa’s acquisition of Quorum International to strengthen its RPO capability in EMEA, Alexander Mann’s purchase of Capital Consulting to enhance its ability to serve the European and Asian markets, and Adecco’s acquisition of TalentTrack to strengthen its position in North America.

What benefits do acquisitions deliver to RPO providers and buyers?

•  RPO contracts often begin with the provision of services in one or two geographies. But if the relationship proves successful and the provider can service all the client’s geographies, the number of suppliers with which the client works can be reduced and the contracts can be expanded

•  The economies of scale gained by standardization of processes and technologies across geographies reduces expenses for providers and increases cost savings for buyers

•  In countries and regions outside the U.S., clients often want recruiters to be onsite for in-person requirements discussions with hiring managers, to meet candidates during interviews, and greet new hires on their first day and help with the on-boarding process

•  Even in the U.S. where provision of services is more service-center oriented, clients still want providers to be close by to accomplish similar objectives

While growing organically is important, acquisitions can help RPO providers meet revenue growth objectives and satisfy client needs. As a result, we expect further consolidation via acquisition in the RPO provider space. And this consolidation will not only be between big-name players but also with smaller providers that may be experiencing financial difficulties due to reduced hiring volumes and where most of their revenue is paid on a per hire basis.

Gary Bragar, Lead HRO Analyst, NelsonHall

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2 Comments on “RPO Acquisitions Improve Geo Reach, Economies of Scale and Overall Delivery Value”

  1. joe vales Says:

    Gary…

    All the RPO market acquisitions you mentioned are very strategic and have been positively perceived by both strategic and financial buyers . Both types of buyers are back in the market and EBITDA multiples are creeping up again.The problem is that there are few good opportunities left in the RPO market- even on a regional basis … so the RPO seller – assuming that the firm is a true RPO and has EBITDA or is at least cash flow positive – now has a lot of leverage in any transaction.

    Joe Vales
    Senior Partner
    Vales Consulting Group, LLC
    Managing Director
    Vales Advisors, LLC
    1 914 967 3200 …OFFICE
    917 592 8939…CELL
    jvales@valesconsulting.com

  2. Gary Bragar Says:

    Joe,

    Thanks for your insight.

    Gary


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