The employment services market comprises businesses which cover the full spectrum of HR services. Key activities are (temporary) staffing, recruitment, secondment, payrolling and contract management. We have segmented the market into: (i) employment services, (ii) temporary employment services and (iii) staffing & secondment

Employment agencies differentiate in sector focus and service offering. The sector distinction is between agnostics and specialists. The service distinction lies between agencies with one employment service pure-play and integrated one-stop-shops. We see two interesting targets along these lines. One is agencies leveraging a pool of technical workers in the current supply-demand market disbalance are the most interesting targets. The other is one-stop-shops capitalising on the full-service partnership trend.

The key market trend is the rising popularity of flexible contracts. This is becoming so widespread that governments are intervening in the form of abolishing sectoral remuneration and the WAB. The follow-up regulation aimed to disincentivise the use of temporary personnel by increasing the per-contract costs will further squeeze margins

Investor appetite is driven by the easy-to-comprehend business model and high cash generation. The multiple arbitrage potential of integrating multiple agencies provides another exit opportunity push. We however would advise investors to inspect the level of low-qualification jobs – which actually has been the focus point of employment services over the last decades – before investing in a specific vertical. Reason is that the increasing level of automation could dissipate long-term demand