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Created:
12 August 2008
Updated:
13 August 2008
Written by:
Algy Hall

Recruiters have a deserved reputation as one of the market's most cyclical sectors. But, despite the worsening economic climate, bid interest in sector doyen Michael Page from recruitment giant Adecco has caused share prices to fillip on hopes that there are bargains to be had and more bids to come. The last recruitment cycle saw a wave of consolidation during which Page was one of a number of companies to succumb to bids.

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However, hopes of a repeat performance and further share price appreciation in the sector could be prove premature. The takeover activity that characterised the last cycle came at the top of the market and, while recruiters are still reporting rising profits, the cycle looks like it has turned in the UK and US. The Chartered Institute of Personnel Development has recent reported its gloomiest ever labour market survey. Admittedly, records only began in 2004. Nonetheless, the survey results suggest that the UK recruitment market is unlikely to experience its traditional upturn in activity in September.

But UK recruitment companies have become increasingly international over recent years, which is one of the key attractions of Michael Page for Adecco. Unfortunately, though, there is mounting evidence that the economic blight that has hit the UK and the US is spreading to Europe and Asia. Given the worsening outlook, if would-be bidders are after bargains, as Adecco seems to be, it looks increasingly likely they'd do better by waiting until potential targets are experiencing real financial strain and are less willing to hold out for a higher offer. This is especially relevant for the recruitment sector, because successful takeovers need to keep incumbent management on board due to the importance of client relationships and business culture.

And it's not even clear that there are any other big recruitment firms searching for bargains at the moment. Cash-rich Adecco has long been seen as a potential predator in the sector and the weakening of sterling against the Swiss franc makes it a particularly good time for it to pounce. It's hard to find other major players in similar situations. So the recruitment sector as a whole looks likely to remain out in the cold for some time yet.

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