Over the past few months I’ve noticed an increase in the number of staffing firms being acquired. On the one hand, increased M&A activity in any industry is a good sign in a sluggish economy. On the other, if it’s your supplier of staffing services that is acquired you may not be so thrilled and you have every right to be concerned. An acquisition can be a positive for clients, bringing access to new talent pools and the knowledge and experience of the acquiring company’s leadership team, but there can be a downside too. What should you do to ensure that it remains “business as usual” for your company if your staffing provider is acquired? I’m not an M&A expert but in my years of experience as a staffing firm owner I’ve seen the good the bad and the ugly. I humbly offer the following words of advice to managers dealing with this issue:
Communicate, communicate, communicate. First off, let’s hope you hear about it in a proper business fashion: from your current supplier. But with the breakneck speed news travels these days, you could get it first from any number of sources. No matter, once you know it’s a fact, you want to be in the loop about timing, transition and integration plans. Will there be any changes in requisition processes or billing and invoicing procedures? Does the new firm know your VMS system? Or will they “recommend” a change to their preference? As with everything in business, open communication is critical – it’s what you need and should demand from both your current and acquiring staffing firms.
Treat the acquisition as a mini-RFP process. You have a choice: stay with this new, merged staffing firm or change vendors. Change is not usually the preferred option for any of us but take this opportunity to make a smart decision; don’t just accept the new firm, evaluate them. Make sure that they are a good fit, contractually and culturally; investigate their reputation and financials, don’t assume they are sound simply because they were able to acquire your provider. I’m not advocating an immediate full blown RFP process (although that’s certainly your prerogative), but I am suggesting that you think about some of the same questions and KPIs you’ve used in the past and test the new firm against them.
Relationships are everything in the staffing industry. Are they going to keep your sales and client service team? If you like your current service team this may be one of the most critical questions for you. Some acquirers are primarily buying the “assets” of the staffing firm and not the workforce. You’ve invested time and energy building a relationship with your current provider and you probably don’t want to go through that effort again. And what about the consultants? What does it do to morale when they are suddenly working for a new firm? Have their benefits or other working conditions changed? How is the acquiring firm going to address this? These are the kinds of questions you want to ask.
This uncertainty is one of the reasons that I’ve ultimately never been tempted by offers to sell. When ATR signs a contract, I feel that I’ve made a promise, a guarantee to that client to deliver a certain quality of client service. How could I ensure that any acquiring company would treat my clients the way I do? And I never want to upset my clients or seem to abandon them. I don’t doubt the value of a sale and the positives it can bring on many fronts, and I know that M&A activity is a vital part of our economic engine but ATR’s growth over the past 20+ years has been all organic, which suits us well.
Prepare ahead. Assume that M&A’s will happen with your vendors and prepare for it. Build protections into your contractual arrangements when you hire a staffing firm. Make sure that billing rates, KPIs and other critical contractual agreements will be honored by any future firm for the length of the contract. If such a change is something you really want to avoid, make sure your RFP asks about plans to sell. One of our clients was adamantly against going thru this kind of upheaval again and asked that I personally commit that I had no plans to sell ATR in the next 5 years. When a company chooses their staffing firm provider, they expect to be working with that firm for the length of the contract. I’ve seen instances where the acquiring firm ends up being one that the client company specifically chose NOT to work with, or even fired years ago. You don’t need a promise necessarily, just asking the question can often give you more information to make the best choice for your company.
As I mentioned, I’m no expert, and I haven’t personally participated in an acquisition, I’ve just witnessed them from a distance or been hired on after the client is unhappy post merger. I’d love to hear from any of you that have had experience with this. Please share your stories and advice in the comments below!
President and CEO
Having trouble retaining yor best IT employees? Download: 6 Things You Can Do to Dramatically Increase IT Contractor Retention