Takeaways from ASA ExecuVision Event
Members of Baird's Human Capital Management (HCM) team recently attended the American Staffing Association's ExecuVision 2023 in Washington, D.C. The conference featured thought leaders and influencers from the world’s leading staffing, recruiting and talent solutions companies.
Bret Schoch, who leads Baird’s HCM practice, was a featured presenter at the event. Bret's talk, “Standing Out in the Staffing M&A Market,” provided insights from his years of experience selling high-quality organizations in the industry and shared what companies can do to differentiate themselves from being “another staffing company.”
The Baird team noticed several recurring topics across the conference presentations and our discussions with companies and investors at the conference. Here are our team’s top takeaways from the event:
The Labor Market Imbalance Grinds On
- The state of the staffing environment reflects the current job market, where the supply/demand imbalance persists. This dynamic is exacerbated by two primary dynamics: 1) the lasting impact of the pandemic on workforce participation and 2) the sense that companies are engaging in a certain level of “skill hoarding.”
- On the skill hoarding topic: Historically in a market downturn, companies have reduced their workforce. In today’s labor market, many companies are holding onto their employees in the face of an expected recessionary environment, which is further extending the skill shortage. That trend isn’t as uniformly playing out in today’s market. However, it is thought to be broadly driven by acute concerns around the long-term impact that a lack of access or ability to ramp skilled resources can have on growth and performance.
- Labor participation was a frequent topic of discussion as well. While recent labor participation levels are strong, they are not expected to return to pre-pandemic levels any time soon.
Temporary Staffing is On the Rise
- While inherently cyclical, the temporary staffing category continues to grow “peak to peak” through macroeconomic cycles. Looking back at the last 20+ years (1990-2022) the temporary staffing industry grew at a 9.7% CAGR versus nominal GDP of 6.9%. We heard consistent references to the difficult conditions of early spring 2023, prompting most industry participants to further revise down 2023 growth expectations.
That said, the sector is seeing increasing strength in customer demand heading into the back half of 2023. With this, conference attendees indicated they expect momentum will build in late 2023 and carry into 2024, delivering mid-single digit industry growth in 2024.
- Relatedly, participants were interested in perspectives on whether the temporary staffing industry will ever meaningfully break through its historical 2% penetration rate of the overall labor market. While temporary staffing arrangements are more established in Europe, driving higher penetration rates, the U.S. is becoming increasingly more accustomed to more broadly leveraging temporary staffing arrangements. That trend is playing out through data that suggests that the industry may continue seeing “higher highs” through each cycle, most recently eclipsing 2.1% (a high-water mark).
The Emergence of Generative AI
- As is the case for many industries, AI has very much emerged as a key theme for Staffing. The industry has seen the emergence of new models that offer AI-powered and/or mobile staffing solutions, which can be very powerful tools for enterprise clients.
Specific to the temporary staffing category, the general sentiment among conference participants was AI will be yet another powerful tool to drive efficiencies within an organization or recruiting function. For the industry’s day-to-day, AI may replace some back-office functions and even some aspects of the recruiter role. However, that impact is largely expected to be felt via the replacement of routine tasks rather than eliminate the recruiter’s role completely. In turn, AI is viewed as an opportunity to further enhance operational productivity of key resources, in particular producers, who will in turn have more capacity to focus on higher-value tasks.
- Further, industry thought leaders see AI’s impact has inherently limited by the expectation that buy-in will be required from both the customer and candidate. This may be a lower hurdle for higher volume positions. However, for higher-skilled positions that require a more nuanced approach and need for specialized delivery, it is worth considering how and if a candidate would be drawn to pure AI interactions versus having a recruiter relationship and bespoke placement. Additionally, there are certain end markets, such as healthcare and federal, where pure AI solutions could present regulatory or legal issues.
Perspectives on M&A in Staffing
The ASA audience benefited from hearing experienced perspectives across numerous topics related to M&A in the staffing industry. A few highlights include:
- An overview of how the staffing M&A landscape has transformed coming out of COVID but in the wake of new macro-economic uncertainty and how that has cooled some of the M&A activity within staffing relative to years past
- Insights into key differentiators that private equity partners look for when reviewing a potential staffing asset investment, including: growth profile, bill rates / margin, scalability and M&A opportunity
- Bret Schoch’s perspectives on the importance establishing specialized business characteristics that differentiate a staffing business from its peers and enhance valuations during a transaction
Interested in learning more about these topics or opportunities in the Staffing space? Connect with Baird Global Investment Banking.
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