The human capital sector comprises businesses focusing on supporting companies with their human resources needs. Services and technology are required over the entire employee lifecycle, ranging from recruitment and job boards, through to on-boarding, core human capital management (including payroll & benefits), workforce planning, talent management (inc. rewards & recognition) and offboarding.

Areas of evolution in the market in recent years have been ongoing growth in managed services models (i.e. Recruitment Process Outsourcing (RPO) or Managed Service Provision (MSP)), as well as expansion in in-house talent acquisition and search teams. LinkedIn has, in some ways, opened up recruiters’ black books to the world, but at the same time reinforced the importance of good recruiters in finding the “right” candidate for a job.

There has also been ongoing growth in grad-to-perm models where recruiters take on the role of training prior to staff taking on full time roles. This has been particularly prevalent in the IT sector (e.g. with Sparta / FDM), although these firms wouldn’t conventionally be classified as recruiters. GDPR and data protection legislation has also taken up management time, although examples of any recruiters actually being fined for lack of compliance are so far limited.

On a global basis, the UK is a relatively mature recruitment market, with a higher degree of agency penetration than most other international markets, as it developed earlier. As a consequence, it has successfully nurtured a disproportionately large number of global recruitment firms (including Hays, Michael Page, Alexander Mann, NES, AMS and Odgers Berndtson) who have successfully expanded internationally. Other UK market leaders have been in talent assessment, with the growth of firms such as SHL, as well in leadership consulting with players such as YSC.

Within recruitment, the fastest growing players in recent years have frequently been either functional specialists or sector specialists. Given the size of the sector, and relatively low barriers to entry, there are frequently new SME entities being spawned.

The UK is also home to some significant providers of supporting HR technology, particularly in core HR and payroll. Key examples of larger players would include Iris and MHR in the larger payroll, and Rewards Gateway in benefits management. Internationally, some of the largest players in HR technology frequently are part of broader ERP systems (e.g. SAP, Oracle) with a small number of HR specialist players e.g. Workday.  Within recruitment, technology development is improving productivity with the likes of Bullhorn, or in data areas (e.g. Text Kernel), CV parsing or job posting (e.g. Broadbean).

In recent years there has been significant interest from private equity players in human capital technology platforms of scale, with some quasi-trade private equity firms emerging. Hg Capital’s investments in Iris, Access Group, Allocate Software, and outside of the UK in Visma, demonstrates private equity firms’ enduring appetite for this sector.

The key challenges for recruiters are around differentiation, in frequently crowded markets, and cyclicality of demand, particularly in permanent recruitment. Other challenges are often around staff attraction and retention (particularly of senior staff in executive search).

Fairgrove experience

Fairgrove has experience of the following sub-sectors within Human Capital:

  • Executive Search
  • Recruitment
  • Contractor Platforms
  • Job Boards (e.g. Student-Focused Job Boards)
  • Executive Interim
  • Talent Research
  • Payroll & Employer of Record (EOR) (inc. related technology)
  • Internationalisation Services
  • Rewards & Recognition (inc. related technology)

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Co-CEO, Executive Search Firm

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CEO, Media Group

“Fairgrove got rapidly up to speed with the specifics of the market niche we operate in. Their analyses provided us with timely and concise conclusions on its position in the market, and gave us a wealth of insight to confirm our investment hypothesis”

Director, Mid-Market PE Firm