The Human Resource Outsourcing (HRO) industry is one that has been shaped by M&A and the background screening industry demonstrates how M&A can define the landscape of the industry.

Given its tie to employment, the background screening industry is impacted by the overall health of the economy and job growth as well as regulation and technological advancements. That said, the landscape of the industry today has been defined by the historical M&A activity.

The background screening industry is dominated by providers that generate less than $100 million in annual revenue from commercial screening services. There are only three providers that generate over $200 million in annual screening revenue and each of these providers became market leaders by pursuing an acquisition strategy. First Advantage, previously public and now backed by Symphony Technology Group, is a consolidation of over 40 screening companies. The commercial screening business of Altegrity is a conglomeration of 10 screening companies, including the two substantial acquisitions of HireRight and the background screening business of Kroll (note that HireRight is currently on the market with a $1 billion price tag). Finally, Sterling Infosystems, backed by Calera Capital, has made 8 acquisitions to complement its significant organic growth.

As the three leaders continue to search for growth opportunities and middle tier firms look to gain market share to take advantage of economies of scale, conditions are particularly ripe for sellers in the background screening industry. Said simply, there are many interested buyers. Moreover, private equity firms have demonstrated interested in the industry, creating more options for firms considering strategic alternatives such as a recapitalization or raising growth capital.

Source: HighBank Advisors, for more information contact Cherie Homa, Managing Director,

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