Hello,
I am doing some digging in the PEO world (payroll and benefits specifically) and I'd love to connect with someone that is familiar with this space and could speak to the ins & outs as well as relevant deal considerations!
PEO Acquisitions
by an member from Virginia Polytechnic Institute and State University (Virginia Tech)
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The major downside (for me) was that there has been a lot of PE activity with PEOs over many years. While consolidation and PE investment is a good thing if you are early, it makes things challenging if you are late. I thought I was too likely to run into high valuations and competition from PE firms (including platform companies).
If I were looking at PEOs today, I'd ask industry contacts where they think the industry is on the consolidation curve and how much deal competition they see. I'd also consider focusing on niche/industry-specific PEOs that serve growing industries. Going small helps with competition, serving a growing industry makes it easier to grow, and having a defensible niche makes you a more attractive bolt-on acquisition for a larger PE platform.