Considering selling your recruitment business?

What you need to know (from the M&A expert behind the scenes)

Selling a recruitment business is very different to starting one. You go from building a desk and a team to building an asset someone else is willing to buy. For founders, that raises a few big questions.

What exit routes do you actually have?

How are recruitment companies valued in today’s market?

What makes one agency more attractive than another when the numbers look similar on paper?

In our recent webinar, Kitto founder Kris Holland sat down with M&A advisor Philip Ellis (Optima) to find the answers.

This blog pulls out the key themes. If you want the deeper dive, you can download the full PDF guide for a more detailed breakdown and checklist.

Prefer to watch the full conversation?

Watch the full discussion below.

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What exit routes do recruitment owners actually have?

Not all exits are created equal, and not all of them involve a classic “trade sale”.

Founders in recruitment typically have a few main options:

• Trade sale – selling to another recruitment or human capital business (UK or international).
  
  
• Private equity backed trade buyer – a PE-backed recruitment group acquiring you as part of their growth strategy.
  
  
• New PE platform deal – less common in the current market, as recruitment is not “flavour of the month” for new PE entries.
  
  
• Management buyout (MBO) – selling to your own leadership team, often on softer terms paid over time.
  
  
• Employee Ownership Trust (EOT) – selling a majority stake to a trust for the benefit of employees.

MBOs and EOTs are often more “internal” in feel. They can be less disruptive for staff and clients, but the economics and tax profile are different.

On EOTs, there has also been a recent change founders need to be aware of. Where previously the EOT route could be fully tax free, now only 50% of the sale price is exempt from tax. The rest is subject to capital gains, depending on your history and allowances.

“You might pay less tax, but you might wait a bit longer for the proceeds and of course if the business doesn’t perform you may never receive all of those proceeds.” 

— Philip Ellis, Optima

How are recruitment companies valued today?

The starting point is still familiar corporate finance territory.

Most recruitment businesses are valued on a multiple of EBITDA, which gives you an enterprise value. For example, if your adjusted EBITDA is £1m and the appropriate multiple is 5, the enterprise value is £5m.

That is not the cheque you get.

To get to what you actually receive, buyers then adjust for the balance sheet:

• Cash is broadly added
  
  
• Debt is broadly deducted

One area that often catches recruitment founders out is funding.

“Factoring and invoice discounting is almost always classified as debt.”

— Philip Ellis, Optima 

If you have a large invoice discounting or factoring facility drawn, it will normally come off the headline valuation. A business with £3m sitting on the invoice finance line is not going to receive the same equity value as a similar business that is debt free.

What multiples do recruitment firms typically sell for?

In the mid-market band (roughly £0.5m–£3m EBITDA), Philip typically sees deals land somewhere between 3x and 7x EBITDA.

• Below 3x tends to suggest distress or serious issues.
  
  
• Above 7x suggests something genuinely special in the mix.

A lot of transactions land in the 4x–5x range, with the exact number pushed up or down by risk factors in the business.

A few of the big ones:

• Contract vs perm mix – if around 70% of gross profit comes from contract or temp, you are more likely to achieve a “full” multiple.
  
  
• Revenue visibility – repeatable, sticky income beats one-off placements.
  
  
• Advisory and solutions – statement-of-work, advisory and genuine solutions-based partnerships can support higher valuations than pure “bums on seats” models.

It is not that perm-led businesses have no value. It is that buyers pay more for earnings they can see coming.

What makes a recruitment business attractive to buyers?

When buyers look under the bonnet, they care less about what you billed last quarter and more about how that money is made and who it depends on.

Key value drivers Philip called out:

• Founder dependence – if the business still heavily relies on one or two founders for client relationships and leadership, a buyer sees risk.
  
  
• Management strength – a capable, trusted second tier who can run the business day-to-day improves both price and deal structure.
  
  
• Client concentration – overreliance on one or two accounts will worry most acquirers.
  
  
• Revenue mix – healthy contract / temp base, plus repeat perm where appropriate.
  
  
• Compliance – particularly in payroll and umbrella. Non-compliance can destroy value overnight.
  
  
• Team shape – a spread of solid billers is de-risked compared to one superstar carrying the number.
  
  
• Retention and incentives – sensible equity or long-term incentives can make key staff more likely to stay post-deal.

On PSLs, being on a preferred supplier list only matters if it actually drives volume. The label alone carries very little weight.

How does brand and niche focus influence valuation?

Two agencies can show very similar P&Ls and balance sheets and still be valued differently once a buyer understands the story.

If one has:

• A clear sector focus
  
  
• Strong presence in a defined niche
  
  
• Recognisable brand and community
  
  
• Salary guides, events, content and a visible LinkedIn footprint

…and the other has a more scattered model with a few random outlier sectors, the first business is more likely to command the stronger multiple.

“A pound of profit isn’t necessarily a pound of value.”

— Philip Ellis, Optima 

Brand, focus and community all help convince a buyer that what you have built is defensible, scalable and replicable, not just a collection of desks making good money this year.

When should founders start preparing for an exit?

Sooner than you think.

You do not need to put the business on the market tomorrow, but you do need to:

• Start stepping back from day-to-day operations
  
  
• Move key relationships into the wider team
  
  
• Clean up the balance sheet where you can
  
  
• Tighten compliance
  
  
• Decide which sectors you are really in (and which you are not)
  
  
• Get an external view of value to avoid an “expectation gap” later

Thinking in terms of asset value, not just near-term profit, is the mindset shift that separates the minority who successfully sell from the majority who never do.

“If you're the leader going through an earn-out, your instinct is to pull the business closer and protect it…which completely clashes with the need to step back and let the transition happen.”

— Kris Holland, Kitto

So, now what?

If you are starting to think seriously about your own exit, there are two good next steps:

1. Talk to us about your brand and positioning – if you want your eventual multiple to reflect the real quality of your business, your brand, niche and community need to tell that story long before the first buyer meeting. Want to learn more about it? Get in touch.

2. Download the full PDF guide – a deeper breakdown of exit routes, valuation mechanics, and a practical preparation checklist.