Which of My Screening Industry Predictions Are Coming True?

If you remember about six months ago, I put out my “Top 6 Predictions for the Background Screening Industry.” I wanted to write an update to see where we are.  The past few months have been interesting. From what I hear sales were down a bit in non-retail screening since October 2019, but that was expected.  All in all, most CRA’s had a stellar 2019 with lots of growth and new client acquisitions for mid-sized and larger firms.  With a few of my predictions starting to gel, this industry could be very different in the coming years even if only a few of them come true.

1. CRA Consolidation – Six months later, the mergers and acquisitions market is hotter than ever.  Recently, First Advantage was sold off by Symphony Technology to another private equity firm called Silver Lake.  While this wasn’t a shock to most people, I guarantee that they will look to build organically and through acquisitions.  Probably the most substantial acquisition is Accurate Backgrounds purchase of CareerBuilder Employment Screening (CBES).  I have received a lot of questions as to why this is so monumental.  First, CBES is substantially larger than most people perceive them.  Second, Accurate Background has always been a leader in technology and efficiency.  Put that together with CBES, and you have a serious contender to be in the top 3 in size. The two firms together create a larger CRA that could look and feel like a boutique firm to their customers. The management team at Accurate Background is the best in the business. I have complete confidence they will continue to grow that business, win a lot of new clients and enter new markets.  Who’s next?  It’s hard to say but there will be more.  We will enter a recession soon and CRA’s will struggle, many will sell because they have to and others will because the timing is right. 
2. Vendor Consolidation – There is a lot happening here but much of it is under wraps.  I previously talked about Checkr acquiring Themis, but something else significant has happened since.  Within the last week or so Checkr has also purchased or is getting ready to purchase Rapid Court.  I will cover this more in the next section but trust me when I tell you that this is significant.  You will continue to see more consolidation in this space in the coming year, it’s a natural occurrence.  If I had to guess, the vendor landscape will look vastly different next year.  We have lots of data vendors, county vendors, platforms and researchers.  Someone will make a play to roll many of these up.  We’ve already seen this with Appriss, and they will likely continue, but Private Equity is also bullish on this type of roll up.
3. Subscription Based Screening – So yeah, like I said six months ago, Checkr is buying into the supply chain.  This is enormously noteworthy.  I’ve had a suspicion for a long time that the industry will move in that direction.  With Checkr buying Themis and now Rapid Court they can dictate their own terms now.  I see three big things coming out of this:
   1. They will attempt to change the market to subscription based, flat fee with re-occurring models like monitoring being in the forefront.
   1. They will own a decent portion of the supply chain.  They will try and convince other CRA’s to buy from them and will make a market to do so.  What does this mean?  If they are as good at this as I think they can be, the Checkr brand could be as powerful as FACIS.  An end user will buy from “ABC CRA” but will want to ensure the Checkr brand is part of that.  You may think I’m nuts here but imagine if next year Checkr owns a bunch of your current suppliers and what really smart people could do with that! My next prediction here; Checkr will soon be their own source for MVR’s!
   1. Self-sovereignty.  I’ve been saying it for a long time that blockchain is great for the industry, but no one has figured out how to make money at it.  Checkr is very well positioned to begin using this sort of technology in an effective way.  They don’t need to make money at it if some of these other things shape out.  There could be a world in the coming years that your “up to date” and “complete” background check is owned by the consumer and updated and validated by…you guessed it, Checkr.
4. Product – Our little “monitoring” flower is beginning to bloom.  SJV has launched one of the first industry true real time monitoring product for your clients.  I think less than 10% of the market is using something like this so there is a huge opportunity to grow it.  Other suppliers like crosschq are disrupting how verifications and references are being done, so look out for more from these two forward thinking companies.  Product growth will be the most important and significant ways CRA’s can keep building their businesses and increase profitability.  Don’t forget, this is a very mature market, you have to distinguish yourselves in some ways and new products is one of the only ways to do it with meaningful results. 

While I made several other predictions six months ago these are the four I wanted to show movement on.  The real question is for screeners, are you ready?  Can you pivot?  I am happy to discuss these with you either in person at the PBSA mid-year or feel free to shoot me an email.  I am of course here to help you recruit top talent and also grow your business.  Nick Fishman and I, along with some others, have over 50 years of experience in running screening firms, we’re happy to give you a free consultation. 

Best,

Jason