Sheri Tischer, Vice President of Business Development – Staffing at Scale Funding, discusses mergers and acquisitions with Jerry Grady, CPA, and Bryan Besco, Marketing & Business Development Director at UHY Advisors.
UHY guides staffing agencies through the pre-acquisition and due diligence stages, integration management, and merger transformation after the deal has closed.
According to Jerry and Bryan, mergers and acquisitions in the healthcare staffing sector are kicking off. M&A for healthcare staffing began to pick up shortly after the pandemic started.
Jerry Grady and Bryan Besco state that “it is a great time to sell in healthcare staffing. Clients are getting a lot more for their business than they thought they would.” They are seeing more and more staffing agencies beginning to consider the sale of their company due to the high level of interest in buyers. There are larger companies who want to acquire the smaller staffing agencies.
UHY has seen many staffing business owners receive PPP money and pay their debt, revealing the cash value of their business showing up on their value sheet. This opens the door to a new world of opportunities and relief for staffing owners. Not only does their company look good on paper, but they also have the option to get out while they are ahead, avoiding any potential turmoil or obstacles that may lie ahead in an unknown economy.
When considering putting a company on the market, staffing agencies need to decide whether they want to sell on a private or public level.
If selling privately, staffing firms may target their business to a smaller group of people. Smaller groups can come with some disadvantages because they may not get the same value as going to the marketplace.
If staffing agencies are considering selling their business, it is best to walk through all the different avenues and see what is right for them.
When UHY goes to market with public companies, a teaser goes out to 150 – 250 people. Recipients who agree to look at the data and sign a non-disclosure form will access the book of business on the company for sale. From there, they create a letter of intent (LOI). UHY will review the LOI and select potential candidates who feel they have the capital and are really a genuine buyer versus a company just looking around.
Bryan makes a great point by suggesting that it does not always come to the value of a staffing agency when selling their business. It is about finding the right fit or private equity for their business for some staffing firms. Business owners put a lot of blood and sweat into their company, their baby. Business owners care about their employees, and they want them to be protected. Some owners may wish to continue working for their company after the sale. UHY will handhold its clients through the entire process, steering them in whichever direction they choose to go. The client holds power.
Sheri Tischer mentioned that Scale Funding recently brought on a client who owned a staffing firm in AZ. The staffing owner was able to self-fund his agency, but when he acquired a new firm in Illinois, he looked to Scale Funding to help fund his accounts receivables.
Jerry says that UHY is a strong proponent of A/R financing. Staffing companies may want to get clients staffed quickly, and they need the working capital to do so. With a/r funding, also known as payroll funding, they can meet payroll without waiting 30, 60, or 90 days to get paid: one of the biggest challenges for staffing agency owners.
Additionally, from a tech stack standpoint, staffing owners want to become more efficient by upgrading their systems and processes. Technology is always a hefty expense that requires steady cash flow to make any tech advancements. Payroll funding becomes an excellent financing option for these upgrades, and banks don’t generally offer funding for these types of technology and operating costs.
Since 1994, Scale Funding has provided best-in-class payroll funding solutions to thousands of small to midsize staffing agencies across the United States. Scale Funding Capital is a division of Fidelity Bank, allowing you long-term financing options. We believe in getting our customers paid for the hard work they do.