Companies in all industries have become increasingly focused on the overall talent experience. Recruiting, developing and retaining skilled talent are top-of-mind for executives. As those issues persist, we expect companies to turn to staffing firms to supplement their recruiting efforts. And as companies focus more on diversity, equity and inclusion (DEI) and enhancing employee benefits, we expect them to engage with more human resource consulting firms.
Our RSM US Middle Market Business Index special report, released Jan. 13, indicates that over 56% of middle market executives surveyed plan to ramp up their hiring over the next year, with the overwhelming majority of them indicating that it’s difficult to fill their current roles and to compete with local competition.
And in the 2021 Paychex Pulse of HR annual report, the HR leaders surveyed revealed that the three biggest challenges they face are talent recruitment, planning and managing, and offering competitive employee benefits.
Those sentiments translate to great growth opportunities for workforce solutions firms, continuing their momentum from a record-setting 2021.
As mentioned in our quarterly industry outlook, $6.33 billion of capital was raised to invest in workforce solutions firms through the first eight months of 2021, more than twice the amount raised for the sector in all of 2017, the previous high of the past 10 years.
Then, as we predicted, the year finished strong, totaling a whopping $18.19 billion in capital raised to invest in this sector, shattering any year in recent history. Private equity deal count is also on the high end over this same period.
Private equity firms clearly see the value of workforce solutions firms, evidenced by the significant capital raised and the number of deals closed in the space in 2021. With companies prioritizing their talent experience, and thus embracing the solutions that firms in this sector have to offer, expect private equity firms that are investing in this space to quickly raise the equity value of their investments, likely leading to a quick exit, indicating a successful transaction.