According to recent forecasts within Corporate Finance, 2025 is set to be a more industrious year for M&A transactions within Human Capital. With trade sales making up 62% of the 104 deals last year, according to BDO’s latest Annual Recruitment M&A Report, it seems likely that this will continue to be a favoured option for founders looking for a capital event this year.

Having stood in the shoes of the acquirer and packaged commercial due diligence on multiple prospects, it’s perhaps an opportunity to share a perspective of what we prioritised operationally when assessing potential targets. So, for those looking for a pedestal in M&A’s shop window in the future, here are 5 high-level pointers that trade buyers will be drawn to:

• An edge

 Unless they’re chasing market share, a strategic buyer will be looking for something they don’t have already – a competitive edge, perhaps a market segment, a new sector, an alternative service offering, or access to a geography. Therefore, companies with a clearly defined and focused proposition will be favoured. Be aware that any serious due diligence will slice through fluff and spin so don’t rely on digital collateral alone to project this message; your trading data needs to endorse claims of a specialist proposition.

• Dependency Lite

 Any dependency represents a risk to a future owner. This covers a broad spectrum of themes including dependency on the founders, high performing consultants and key clients. So dilute, or even better, extinguish dependency through succession, staff development and new sales to create a balanced, resilient and scalable platform. Founders that maintain an integral role may well find a depreciation of enterprise value and a disproportionate weight attached to their deferred consideration, reflecting some reciprocation of risk.

• Scalability

 The story and historical trading of a target will be of interest, but it is far less relevant than the perceived potential for future scale. Tier 2 management will be pivotal to this. If the future leadership team can drive growth, develop future leaders and potentially add additional, discretionary value within the acquiring business, then this cohort is pure gold to a trade acquirer. Wherever possible they should be incentivised & committed accordingly. Losing them post deal completion will be painful to both vendor and acquirer.

• Performance over profitability

 While profitability will be important to any exiting owner as it generates enterprise value, sales productivity will often be a more significant metric to a trade acquirer. In fact, we actively targeted less efficient profit conversion, believing that we could gain increased profitability by realising synergies and driving economies of scale across both infrastructure and procurement. Sales performance, though, was the metric that got our attention, particularly if it was supported by a proven process, perhaps augmented with smart tech, that could be industrialised to drive future growth.

• Pipeline

 For us, visibility of future earnings was integral to mitigating risk on an investment. Permanent recruitment offers little “stickiness”, compared to the recurring revenue of a contract, or a “temp” book. A healthy forward order book offers real comfort to an investor and will typically enhance value. However, if your business model is centred on permanent recruitment, there are plenty of examples where evidence of strategic client relationships, a smart delivery engine and ideally some creative additional offerings such as embedded models, or consulting channels can still generate a healthy return for exiting shareholders.

 This guide just represents the early considerations when assessing an acquisition prospect and once you get into formal due diligence there can be more complex hurdles to navigate. But unless you’re ruling out a trade merger and you’re a committed member of the “38% club”, I hope that this overview can help generate, or perhaps endorse some smart strategic moves that will encourage competitive interest among active strategic acquirers in the months ahead.