Buying another PEO is an expensive and time-consuming proposition. It can also be disruptive to both the buyer and the seller, and to their employees and clients. It’s imperative that both sides do their due diligence, make sure there is a fit beyond the economics of the deal, and that the post transaction integration is completed with minimal hiccups.
The past 18 months have been interesting for the world, the United States, and the PEO industry. Almost everyone has felt the results of the COVID pandemic both personally and professionally. We hope we have felt and seen the worst of it and we can return to some level of normal shortly.
It should be no surprise, then, that the PEO industry, as well as mergers and acquisitions (M&A) and consolidation, have also been through a significant amount of change. In this article, we will explore some of the recent trends in acquisitions and the current state of affairs, and look forward at what we might see happening in the next two to three years.
The M&A landscape in the PEO industry has been in a state of consolidation for more than 10 years. The COVID pandemic put a temporary halt on many transactions in early- to mid-2020. In Q3 of 2020, deal flow began to rebound, and as of 2021, many deal multiples appear to be at or above pre-2020 levels. The market is very active with a combination of industry veterans and new entrants.
Investors interested in the PEO industry commonly want an overview of the risks facing PEOs. While it is impossible to cover every material risk for every possible transaction in 1,000 words, we accept the challenge and will attempt to cover common risk themes as in-depth as possible.
An entrepreneur selling his or her business represents years of hard work, sacrifice, and financial and emotional investment, which can be a stressful and daunting task for any business owner. For a large proportion of owners, this is the first time they or their teams have been through an exit process. Anxiety and fear are common emotions when contemplating an exit, but most of this unease can be eliminated through educating yourself about the exit process. Even more important is preparing your company to both maximize the value at exit and minimize the chances of a false start or failed transaction.
Never is a very strong word! I alwaysstayaway from using superlatives because we neverknow what the future will hold. Seriously though, these past 18 months have taught all of us that it is good to prepare and make plans. However, the most well-intended strategic planning may not always prepare you for what happens next. We must have the ability to pivot and modify plans, if necessary. While I cannot foresee a time when we would ever sell
On the last night of the 2021 NAPEO Annual Conference & Marketplace in San Antonio, Andy Atsaves of Artex Risk Solutions and I were chatting, and at some point during the conversation, he made the comment, “I’m just not in conference shape.” That was so true!
HEALTHCARE BENEFITS • JOB STRESS • HAPPY ANNIVERSARY! • CENTRAL STAFF SERVICES •
VACCINE MANDATE • WHAT POTENTIAL EMPLOYEES WANT
A passion for growing businesses, helping people, and serving the community are the bedrock principles of Redding, California-based Teamwork HR. Heidi Corrigan leads this 26-person team with an energy and enthusiasm that keeps her team motivated to excel and serve clients.
Laying to rest any doubt that employers would continue to enjoy a business-friendly interpretation of the standard to determine joint employment status, a federal appeals court recently put the final nail in the coffin of the Trump-era attempt to shield businesses from being considered joint employers in a wide spectrum of circumstances. This move clears the way for the current administration to cement into place a broad standard that captures a wide swath of business arrangements into the “joint employer” category.
At the end of 2020, management consulting firm McKinsey & Company surveyed 899 C-suite executives about the impacts of the pandemic on business operations. One of their conclusions was that the pandemic had accelerated the adoption of digital processes by three to seven years, with B2B firms like those in the PEO space on the higher end of the spectrum.
Investment bankers sell companies by running a “sales process.” This process includes becoming knowledgeable about a company’s business, finances, and operations followed by analyzing that information, preparing marketing information, evaluating and contacting the buyer market, reviewing and negotiating offers, conducting due diligence, and negotiating the transaction documents. And then the transaction closes.
Traditionally, many PEOs have relied on their sales teams to generate leads and build sales pipelines to support company revenue growth objectives.
Many organizations are finding that this model isn’t sustainable in this challenging post-COVID business environment. The sales team’s prospecting efforts are yielding fewer and fewer meetings with new prospects. This results in fewer proposals being presented, fewer deals closed, and ultimately, anemic (or even flat) revenue growth.
The PEO Employment Index comprises 149 PEOs, 2,000 PEO worksites, and 160,000 worksite employees. It measures the expansion or contraction of PEO worksites through the bi-weekly census data that is collected through the 401(k)-contribution process. Unlike many economic reports that consist of survey data and consequently can be somewhat subjective, the PEO Index is real-time data of actual hiring and terminations at the worksite level.
For those few brave souls—other than Christina Nelson—who wade through my column every month, you’ve read about how our world here at NAPEO has changed, as it has with all of you. When asked during the Board of Directors retreat in July “What has the pandemic changed?” board members, to a person, said they ventured into areas they hadn’t previously worked in, and they and their staffs were all working very long hours to be responsive to their clients.