Human Capital Market Review Q2 2020

Gambit Corporate Finance LLP announces the publication of its Human Capital Market Review for Q2 2020.

This edition examines the current UK economic landscape, also highlighting the key opportunities and threats to corporates in the current environment. We also consider the latest state of play in the M&A market, where, despite a fall in activity, encouraging signals have begun to emerge.

To read the full report, please click here.

Q2 2020 Report Summary:

  • The UK government has been committed in its support of the economy through the unprecedented volatility posed by Covid-19, cushioning the blow to both Human Capital companies and jobs in the near term.
  • As distressed sales rise in prominence, opportunities to perform part or whole acquisitions at reduced valuations will increase, leading to innovative deal structures where the role of expert advisors will be of vital importance to ensure optimal value realisation.
  • As a result of the mixed fortunes that corporates have faced over the course of the pandemic, we expect to see heightened consolidation within the Human Capital sector, as assets with a defined sub-sector niche become a part of larger corporate portfolios.
  • Despite a drop off in deal volumes, deal values held up well, helped along by market interest in assets with core competencies in subsectors where hiring activity has remained buoyant and relatively unaffected by market uncertainty.
  • All UK M&A activity consisted of domestic transactions as listed businesses faced reduced competition from abroad. As government legislation to tighten rules on foreign takeovers is enforced, this trend is likely to continue, with more domestic activity persisting in the medium term.
  • Although valuation multiples had experienced a period of sharp depreciation at the end of Q1, the unprecedented level of stimulus from central banks globally has helped to buoy equity markets, increasing the EV/EBITDA multiples that the Human Capital market is currently able to attract.
  • Well-prepared acquirors with strongly capitalised balance sheets currently have an opportune moment to engage with the M&A market and take advantage of the current period of heightened uncertainty, as appetite and valuations fluctuate in the near term.
  • Sellers will be encouraged by the market’s resilience in terms of valuations, with those that were considering an exit at short notice prior to the pandemic perhaps now considering initiating a transaction given the improving fundamental data, which shows an attractive market environment.
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