Major public equity indices increased in Q2 2024, up 3.5% quarter-over-quarter and up 22% year-over-year. Leading economic indicators remained stagnant, mirroring the cautious sentiment among investors due to uncertainty around the current interest rate and political environments.
Valuation multiples within the Professional Services sector increased by 3.5% over Q1 2024, slowing from the previous quarter. However, the sector has experienced year-over-year growth of 21.7%, which is directly in line with major indices.
- Within the Human Resources Outsourcing subsector, the median EBITDA multiple in Q2 2024 was 14.0x, representing a 0.8% increase over Q1 2024. The slight multiple expansion can be attributed to the heightened demand for specialized HR solutions including talent acquisition, workforce planning, HR consulting, and benefits administration. Providers with specialized expertise and innovative solutions are well-positioned to capitalize on these demand tailwinds.
- Within the Contact Center Services subsector, the median EBITDA multiple was 8.9x in Q2 2024, increasing 11.2% over Q1 2024. Valuations within the subsector are being propelled by increased refinement and adoption of AI technology. The subsector has experienced significant growth in omnichannel models that utilize a combination of AI and human expertise to serve customers more efficiently.
- Within the Fixed Asset Management subsector, the median EBITDA multiple was 12.8x in Q2 2024, representing a 1.5% decrease from Q1 2024. This downturn is primarily driven by ongoing challenges following the COVID-19 pandemic, as the pace of returning to pre-pandemic work environments continues to be slower than expected.
Volatile equity markets and tightened credit availability have tempered M&A activity in the overall market. However, the ample supply of cash and equity capital will continue to serve as a catalyst for M&A, with both corporate and private equity buyers competing for high-quality assets. Entering Q3 2024, market indicators predict that transaction activity in the Professional Services sector will continue to outpace the broader market.
BGL’s Quarterly Professional Services Update highlights public company operating metrics and M&A activity in the Human Resources Outsourcing, Contact Center Services, and Fixed Asset Management subsectors. BGL remains committed to informing clients of the current state of the Professional Services market and is always available to discuss appropriate M&A strategies and financing alternatives with its clients and prospects.
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