Professional employer organizations (PEOs) are experiencing rapid growth, fueled by a vibrant small business market in need of bundled human resources solutions, according to the Business Services Insider, an industry report released by Brown Gibbons Lang & Company (BGL). Increased regulatory complexity and emerging technology are continuing to drive demand for outsourced services.
The BGL report, now available online, documents a fragmented industry poised for increased market penetration and consolidation, supported by findings from a roundtable survey of leading CEOs, consultants, and investors in the PEO industry. This industry review is an update to the firm’s research publication on the PEO industry from July 2015.
Technology innovation is leading a market revolution. PEOs are investing in cutting-edge technology, HR specialty software and services, and mobile solutions to increase productivity and profitability of operations.
Government backing in the form of federal legislation and certification is expected to provide added credibility and increased awareness to support the sector’s continued positive growth trajectory.
Public and private capital is flowing into the sector, with the level of investment activity rising. Atairos recently increased its ownership position in public PEO TriNet, purchasing the equity stake held by early investor General Atlantic. Kelso & Company, Stone Point Capital, Parallel49 Equity, Morgan Stanley Private Equity, and Clarion Capital Partners are among the latest private equity funds to invest in growth platforms in the PEO space.