What Impact is the Pandemic Having on Mergers & Acquisitions?

August 2020 – Is the Covid-19 pandemic and corresponding economic downturn a time to halt acquisitions or an opportunity to pursue them?

By Akash Taneja, Founder & Managing Partner at Momentum Advisory Partners

Merger and Acquisition activity in the staffing and workforce solutions industry in 2020 began with much of the same positive momentum we enjoyed in 2019, a year in which we saw nearly 150 reported transactions. More than 10-years after the “Great Recession” ended, M&A activity in the staffing industry was still on the upswing. Then in March, the environment unexpectedly changed dramatically due to the novel coronavirus that led to an ensuing global pandemic that is still taking shape.

Analysts is projecting a nearly 20% decline in revenues for the industry as a whole in 2020. Although, some segments in mostly professional areas have performed relatively well during the pandemic, many have been severely affected.

So, it comes as no surprise that the pandemic has put a damper on M&A activity in the staffing industry. In a recent report, “Staffing Industry Insights – Summer 2020”, published by Duff & Phelps, there were 20 reported transactions in the second quarter of this year, down from 38 in the first quarter for a total of 58 reported transactions in the first half of 2020. That’s down nearly 20% from the first half of 2019.

IT staffing led the way with a total of 22 transactions of the 58 total transactions reported in the first half of 2020, according to the report. Light Industrial staffing and Healthcare staffing followed with 10 and seven transactions reported, respectively.

However, despite the difficult first half of this year, I have become increasingly encouraged over the past couple months as activity and enthusiasm has seemed to pick-up as companies adapt to a post-coronavirus reality. I routinely speak with leadership of staffing organizations across the country; they are telling me they are on the hunt for acquisition opportunities across all segments and verticals.

So, is the current pandemic environment we find ourselves in a time to push the ‘pause’ button on acquisitions? I recently spoke with Elie Azar, founder and CEO of private equity firm White Wolf Capital. My relationship with Elie goes back to 2011 when he founded the firm after spending 11 years at Cerberus Capital Management and Ernst & Young.

Elie and White Wolf have been among the most active M&A participants in the staffing / services industry, having completed three platform acquisitions (Consulting Solutions, NSC Technologies, and THD) and 12 add-on acquisitions to these platforms since 2016. He and I got to spend some time on the phone last week so I could get his thoughts on the current environment:

Akash: I want to start by asking how your three platform businesses within the staffing industry have fared since the pandemic really started to ramp-up back in March. White Wolf’s staffing portfolio is pretty well diversified so I’m curious to know how those companies have been affected.

Elie: We’ve been very fortunate that while business has been somewhat impacted, our staffing businesses have generally fared just fine. The businesses we go after are mostly defensive in nature and essential, with a lot of focus on the defense or infrastructure industries.

Akash: That’s great to hear that business has been relatively unscathed. White Wolf has been a very active M&A participant in the staffing industry over the years. How has the pandemic changed, if at all, your acquisition strategy for the balance of 2020?

Elie: As buy and build investors, our plan was, and continues to be, to look for both new platforms as well as add-on opportunities. So far this year, we have closed a total of four new add-on acquisitions. Three for a manufacturing platform company and one for our staffing platform, NSC Technologies, which we just completed in June. We are currently working on closing another four new companies over the next few weeks: one new services platform and three new manufacturing add-ons.

Akash: Wow! That’s very impressive. Congratulations on the recent add-on to NSC Technologies. I’m encouraged to hear that buyers continue to see opportunity in our industry and remain active and companies.

Elie: It’s quite humbling to work with such dedicated, talented folks and I am very thankful for that. Last but not least, I am thankful that our financing partners and investors have been very supportive of our acquisition activity.

Akash: In any of the deals that White Wolf worked on and completed during this pandemic, was there any change to terms and/or structure of those deals? Did the pandemic present an opportunity to re-trade valuations to the downside?

Elie: As I mentioned earlier, the businesses we go after are mostly defensive in nature and essential, with a lot of focus on the defense and infrastructure industries. While business has been somewhat impacted, they have generally fared well. So, we didn’t have any situation that needed to be paused till performance improved or where a major change in valuation was needed.

We look at situations on a case-by-case basis. In some situations, the pandemic has exposed areas of weakness that were covered up during the good times but for the most part we are understanding and adjust for any covid impact (e.g., EBITDAC).

*Author’s note: Staffing companies are valued on a multiple of EBITDA. EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization. The “C” in EBITDAC is an adjustment for Covid-19 that is gaining some traction. Essentially, it’s a way to back out the negative effects of the pandemic on financial results.

Akash: In general, have you viewed the pandemic as an opportunity?

Elie: Definitely not. This pandemic has been so disruptive, wreaking havoc on businesses, communities and families. Besides, credit markets have tightened significantly so any benefit of increased deal flow is offset by tighter credit conditions.

Akash: Due to the pandemic and economic environment, I assume that you and your firm are being perhaps much more cautious as it relates to the types of companies you will consider to acquire. In the current environment, what are you looking for in a potential acquisition target? Is there anything specific? What characteristics are most important to you?

Elie: Assuming that the numbers make sense (valuation/financial performance) the most important thing we look for is cultural fit. We love to partner with growth oriented, motivated management teams that are more interested in that second ‘bite of the apple.’ We obviously understand ownership and management’s desire to take ‘chips’ off the table and diversify their holdings – and we are happy to facilitate that, but we prefer situations where strong motivated leadership is looking to re-invest/roll into the new partnership and together embark on an aggressive growth strategy. While there are no guarantees, the objective is to make their rolled portion at exit become more valuable than the value of the entire business at entry.

**Author’s note: To clarify, re-investing and ‘rolling-into’ the new partnership, means that the buyer would like the seller to retain some portion of the total transaction consideration in equity ownership of ‘Newco’. The idea being that when White Wolf looks to exit its investment, ownership and management will have the opportunity to partake in the upside, giving them the opportunity for another pay day or a second ‘bite of the apple’. This is a very common deal structure in Private Equity transactions.

Akash: Has activity picked up since the start of the pandemic? Are you seeing more opportunities come across your desk?

Elie: Yes – we are definitely seeing a meaningful uptick in the number of deals that come across our desk versus the prior year.

Akash: That’s very similar to what I’ve been hearing from leadership of organizations that are generally very acquisitive over the past couple months and why I’ve been encouraged that we will see a meaningful uptick in activity throughout the rest of the year.

It seems like a forgone conclusion that we are still far away from a more traditional M&A process where pre-covid, meeting face to face for management meetings prior to a closing was the norm. Some of my colleagues in investment banking have said the economic uncertainty wrought by the pandemic had curtailed the ability of many companies to initiate and successfully complete M&A negotiations. How has the inability to sit across the table from the people you are making a significant investment into affected your process, if at all?

Elie: I personally prefer the face-to-face management dinners and meetings but we have adapted. That said, things are working out just fine with using platforms like Zoom and Microsoft Teams. As I noted above, we have been and continue to be very active this year and have closed all our deals this year via virtual meetings.

Akash: Technology is a beautiful thing. I’m getting pretty accustomed to working with clients remotely myself. I can’t tell you how many Zoom calls I’ve been on in the past few months. Only downside so far is I have to make sure to comb my hair and make sure my beard is neatly trimmed.

I’m curious to see if things go back to normal at some point or if there’s a bigger trend of continuing to do many things virtually going forward. My sense is that most buyers still prefer to meet in person prior to closing on the transaction, but I suppose we’ll see soon enough.

I really enjoyed my conversation with Elie. It was very insightful and confirmed my belief that M&A activity in the staffing industry is on the rise. It’s my opinion that acquirors who are strategically determined to make hay during this painful and unprecedented economic environment, will be the ones most able to prevail as economic activity rebounds.

Whether you are considering a potential exit or not, there are a few things I would recommend to every organization during these uncertain times we find ourselves in:

  1. Focus on your customers: Now, more than ever, is a crucial time to reach out to your customers and find out what is keeping them up at night. What challenges are they facing and what solutions can you provide them with? Don’t rely on assumptions. Above all else, make sure you are continuing to provide them with the high-level of service they are accustomed to.
  2. Reach out to your contingent workforce: These hard-working individuals are the life blood of the staffing industry. Reach out to find out what concerns they have around safety, security and continued employment. They are looking to you for answers during these uncertain times.
  3. Communicate with your teams: With all the new challenges that affect your employees, including: challenges and adjustments related to working from home; support services; and safety of those returning to the office, now is the time for leaders to be present and connected to their staff. Now is the time to communicate clearly and frequently about where your organization is going and how you’re going to get there.
  4. Reach out to your advisors: If you haven’t done so already, now would be the time to reach out to your team of advisors, including legal, tax, and accounting. Make sure you are up to date on any new regulations or legislation as it relates to Covid-19. Ensure you are on top of what is available to you in the form of government assistance. Your advisors are there to be a resource for you. Use them.

It’s anybody’s best guess how the pandemic will continue to play out and the effects it will have on the economy. However, for now, it appears things are moving in the right direction as far as M&A in the staffing industry is concerned.

About White Wolf

White Wolf is a private investment firm that began operations in late 2011 and is focused on making direct and indirect investments in leading North American middle market companies.

White Wolf seeks private equity and private credit investment opportunities in companies with $20 million to $200 million in revenues and up to $20 million in EBITDA. Typical situations include management buyouts, leveraged buyouts, recapitalizations, and investments for growth. Preferred industries include manufacturing, business services, government services, information technology, security, aerospace, and defense.

White Wolf also looks to invest with other private fund managers as a limited partner. Targeted investment candidates are North American focused private credit funds looking to raise $50 million to $500 million, with a focus on the lower-middle and middle-market.

White Wolf’s office locations include Miami, Chicago, Montreal, and New York City.

For further information, please visit

Back to News >