THE VALUATION IMPACT

Why tech-led firms sell for more.

Profitability is important. Scalability is important. But in the eyes of investors and potential buyers, what really matters is enterprise value - and increasingly, that value is tied directly to a firm’s technology maturity.

Recruitment firms with embedded technology, clean data, and predictable operations are commanding higher multiples at exit. They are easier to scale, easier to forecast, and less reliant on individual consultants or founder intuition. For private equity, that means reduced risk and higher potential upside. They look for firms with dashboards, not spreadsheets. If they can’t see the business in real time and have a robust forecast of the future, they won’t pay a premium.

RECENT TRENDS IN M&A AND INVESTMENT

EBITDA

Traditional agencies with low tech maturity typically trade at 2-6x EBITDA.

EBITDA

Tech-led firms can achieve 8–12x, depending on revenue mix, client concentration, and growth profile.

WHY TECH-LED FIRMS ATTRACT HIGHER MULTIPLES

Predictability of revenue and margin

Tech-led businesses have clearer processes, stronger data, and more consistent performance. Investors value predictability as it enables better financial modelling and reduces the likelihood of post-acquisition surprises.

Operational leverage

A tech-led model means revenue can grow faster than cost. Automations replace manual overhead. AI handles admin, decision-making, and repetition. That operational leverage is a key driver of higher EBITDA multiples.

Repeatability and scalability

When a business has codified its operations into workflows with automation, and connected systems, it becomes easier to scale, whether that’s across desks, geographies, or brands. Tech reduces dependence on “star” billers and makes growth replicable.

Talent and culture fit

Tech-led businesses tend to attract more modern leadership, forward-thinking talent, and digitally capable teams. For acquirers or investors with ambitious growth plans, cultural and skills alignment matters.

Perception

Phillip Ellis points out, "A recruitment business which has not adopted technology beyond absolute basics will be viewed as old-fashioned, which will immediately impact an acquirer's perception of the company and therefore its value". He continues, "It will also be regarded as under-invested, so valuation will be impacted to allow for the spend required to deploy suitable technology".

Transaction feasibility

A company's approach to tech can affect the very fabric of a sale, as Sohail Ahmad explains, "From a transaction feasibility perspective, a company with a systems and automation, data-driven approach increases attractiveness and likelihood of sale as well as facilitating post-deal integration with a strategic acquirer".

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There is growing interest from non-traditional buyers: tech companies, PE-backed consolidators, and global talent companies, all looking for recruitment businesses with digital infrastructure.

"There is growing interest from non-traditional buyers: tech companies, PE-backed consolidators, and global talent companies, all looking for recruitment businesses with digital infrastructure"

Philip Ellis,

Optima Corporate Finance

DUE DILIGENCE FOCUS AREAS FOR BUYERS

  • Tech adoption
  • Data integrity, controls and visibility
  • Automation and AI use cases
  • Tech stack platform
  • Scalability of current processes
  • EBITDA