NAPEO
The M&A landscape in the PEO industry has been in a state of consolidation for more than 10 years. The COVID pandemic put a temporary halt on many transactions in early- to mid-2020. In Q3 of 2020, deal flow began to rebound, and as of 2021, many deal multiples appear to be at or above pre-2020 levels. The market is very active with a combination of industry veterans and new entrants.
The past 18 months have been interesting for the world, the United States, and the PEO industry. Almost everyone has felt the results of the COVID pandemic both personally and professionally. We hope we have felt and seen the worst of it and we can return to some level of normal shortly. It should be no surprise, then, that the PEO industry, as well as mergers and acquisitions (M&A) and consolidation, have also been through a significant amount of change. In this article, we will explore some of the recent trends in acquisitions and the current state of affairs, and look forward at what we might see happening in the next two to three years.
Buying another PEO is an expensive and time-consuming proposition. It can also be disruptive to both the buyer and the seller, and to their employees and clients. It’s imperative that both sides do their due diligence, make sure there is a fit beyond the economics of the deal, and that the post transaction integration is completed with minimal hiccups.
Investment bankers sell companies by running a “sales process.” This process includes becoming knowledgeable about a company’s business, finances, and operations followed by analyzing that information, preparing marketing information, evaluating and contacting the buyer market, reviewing and negotiating offers, conducting due diligence, and negotiating the transaction documents. And then the transaction closes.
