Business Services subsectors have also declined, but at a lower rate than the public markets, providing higher degrees of stability to investors relative to the overall market. All three BGL Business Services composite indices exhibited year-over-year declines yet are outperforming the S&P 500 by an average of over 13%.
- Within the Human Resources Outsourcing subsector, the median EBITDA multiple was 7.2x in Q4 2022, representing a 5.3% decrease from Q3 2022. This reduction was driven by broad economic factors, including inflationary conditions and rising interest rates, which are negatively affecting employment opportunities. Decreased multiples in the subsector were also due to the stagnation of the unemployment rate, which is not expected to materially decrease throughout the quarter.
- Within the Contact Center Services subsector, the median EBITDA multiple was 10.3x in Q4 2022, representing a 7.3% increase from Q3 2022. Growth trends such as the increased adoption of cloud- and AI-based solutions and ongoing technological advancement of industry hardware and software have allowed the subsector to exhibit growth despite challenging macro conditions.
- Within the Fixed Asset Management subsector, the median EBITDA multiple was 13.4x in Q4 2022, representing a 1.5% decrease from Q3 2022. This modest decline was driven by the subsector’s resistance to economic uncertainty given that Facility Maintenance and Manned Security are deemed to be essential services which are in demand even in a recessionary environment.
Volatile equity markets have tempered M&A activity in the Business Services sector. However, ample capital availability will continue to serve as a catalyst for M&A, with both corporate and private equity buyers competing for high-quality assets. Heading into Q1 2023, market indicators suggest that sector transaction activity will continue to outperform the broader market.
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