GCG’s Q2 2021 Business Services Industry Update provides an overview of the latest trends in the sector, including recent performance, valuation multiples, and the state of the middle-market M&A environment.
Key findings include the following:
- In Q2 2021, public equities across some segments of the Business Services sector saw relatively strong gains, while other segments had good returns, but modest relative to the broader U.S. equity market. The Business Services sector continues to be fueled by the economic rally following the lows of the Covid-19 pandemic and the positive demand trends for many of the critical services the sector provides.
- The Infrastructure sector has been particularly strong as of late with the anticipation that an infrastructure bill might be passed that will lead to increased spending among this segment. The HR/Staffing sector has also made a strong comeback as companies nationwide continue to have critical and imminent hiring needs in the midst of the current labor shortage.
- The volume of M&A activity in the Business Services sector continued to trend positively in Q2 2021 with 160 deals closed, versus 157 during the prior quarter. Interestingly, the average deal value (based on transactions with reported values only) has come down a bit, signaling that the market is more aggressively pursuing lower middle market transactions again.
- At the end of Q2 2021, publicly-traded business services multiples were the highest of the past 3 years. Trading multiples varied significantly across and within the six categories with the strongest multiples observed in the Environmental & Waste Services category.
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