Sell, Buy or Value a Recruitment Agency

Cash on Completion

This is the preferred option for many sellers. Cash on completion works in favour of those who are looking for a clean exit – those going into retirement for example, or someone who is in ill health. Once the company is sold, the buyer gains immediate ownership while a handover period is usually agreed on by both parties. Payment of the transaction is settled once the handover period is complete

Deferred Payments

With deferred payments, a proportion of the price is paid after completion of the sale; on a monthly, quarterly or annual basis. This allows the buyer to pay for the transaction out of future profits, rather than handing over too large a sum at any one time. By accepting payments over a certain amount of time, the value of a client’s business can often increase.

Earn Outs

An earn out is when an initial sum is paid upon completion and then additional performance-related payments are made subject to certain caveats. Further payments are often linked to future growth and may require the seller to remain in the business for a period of time in order to assist in meeting the agreed criteria. This type of transaction would also allow the buyer to finance the deal from future profits. It can also involve clawback agreements – where a seller has to return some of the monies paid if the business fails to perform.

Investment/Elevator Deals

This type of deal allows owners of growing businesses to essentially ‘de-risk’, and take a proportion of the cash ‘off the table’ by selling a percentage of the company. Typically, such owners would remain involved alongside the incoming investor so the business can grow further. Often, the owners exit at a future stage with a ‘smaller piece of a much larger pie’. Sometimes also known as ‘slavery’ – some investors prove themselves to be complete psychopaths and attempt to flog the owners to death in order to increase the turnover and sell the business on at a profit. Similarly it can also be the path to a very comfortable existence if you find the right investor!

Contact us for advice.

There are 6 key sectors where a recruitment agency has more saleability and higher chances of achieving a better price:

• Engineering
• Healthcare
• Renewable Energy
• Teaching
• IT
• Logistics and warehouse

Engineering and IT are probably the two sectors most likely to attract interest. Healthcare agencies with good ongoing connections and contracts will achieve plenty of interest, with the same for teaching. Quite often the saleability will depend on the contracts, staff team and connections within the recruitment business. Contact us to discuss your agency.

Quite often we refer to ‘staff for TUPE’ in our listings. Taillte Mallon, our business manager, has prepared the following note.

What is TUPE?

TUPE stands for Transfer of Undertakings (Protection of Employment) Regulations 2006.

A ‘TUPE transfer’ happens when:
• an organisation, or part of it, is transferred from one employer to another.
• a service is transferred to a new provider, for example when another company takes over the contract for office cleaning.

Your rights are protected under TUPE if both things apply:
• you’re legally classed as an employee.
• the specific part of the organisation that’s transferring ownership is based in the UK.

Does the size of the business matter?

No, the size of the organisation you work for does not matter. Your rights are still protected if you work for a large employment agency, or a small recruitment business.

When does TUPE apply?

The 2 types of transfer where TUPE applies are:

Business Transfers

This is where a business or part of a business moves from one employer to another. This can include mergers where 2 businesses come together to form a new one. It’s possible for the business, or part of it, to have just one employee.
• Your employer must change identity for TUPE to apply.
• You will automatically transfer to your new employer when the transfer happens.

Service provision changes

This is where contracts are taken over. This can be because:
• a service provided in-house is taken over by a contractor (known as ‘outsourcing’)
• a contract ends and the work is transferred in-house (known as ‘insourcing’)
• a contract ends and is taken over by a new contractor (known as ‘retendering’)
• this can also include labour contracts

TUPE Protection

If an transferred employee is dismissed either because of the transfer or a reason connected with it, their dismissal is automatically unfair.

Notice Period

• The organisation needs to give 45 days’ notice. However, some organisations will give more than this to enable employees to ask questions and attend meetings.
• Employers must inform and consult with either a trade union or employee representatives about the TUPE transfer
• Businesses with fewer than 10 employees are not required to invite the election of representatives for consultation purposes if no existing arrangements are in place.

How long does TUPE last after transfer?

• The protection period by TUPE is indefinite. If the new employer attempts to change the terms and conditions of a contract because of the transfer, it’s illegal. TUPE can still protect an employee even years after the transfer.

RAS Recruitment Agency Sales is owned and operated as part of the Jonathan Fagan Business Brokers companies. Our two owners are both Fellows of the Institute of Recruitment Professionals (FIRP) and have owned recruitment agencies for over 20 years. We have been involved in buying & selling businesses for the same length of time. Uniquely, we own recruitment agencies specialising in the legal profession and one of our owners is a solicitor. Our recruitment agencies deal with both permanent and locum lawyer roles. We are in an ideal position to be able to advise on the best course of action in terms of preparing the legal documentation required for a sale or purchase, and to also guide you to the best advisers for your business (and at the best price). We also own a business lawyers platform, www.interimlawyers.co.uk, which can provide legal advice & assistance starting at just £75 per hour.

Quite simply – the staff. Without the staff, your recruitment agency is probably close to worthless, unless you have strong evidence of ongoing work and good contracts. So next time you think about firing someone for not achieving their monthly target, take a breath and think it through.

Recruitment consultants with provable billing records and a history of maintaining and building strong connections add immense saleability to your recruitment agency.

Contact us for a discussion.