Hudson Global and Star Equity: A Merger to Rule the Recruitment Landscape

The recruitment services sector is undergoing a seismic shift. On May 21, 2025, Hudson Global (NASDAQ: HSON) and Star Equity Holdings (NASDAQ: STAR) announced a transformative all-stock merger designed to create a dominant player in recruitment process outsourcing (RPO) and adjacent markets. This combination of scale and niche expertise could redefine the sector’s competitive dynamics, unlocking a valuation upside that investors would be wise to pursue aggressively.

A Strategic Masterstroke: Scale Meets Specialization

Hudson’s global reach and Star’s deep expertise in niche recruitment segments form the bedrock of this merger. Hudson, a leader in RPO and contingent workforce solutions, brings a robust client base across industries. Star, meanwhile, specializes in high-touch, sector-specific recruitment—such as construction, energy, and industrial staffing—through its subsidiaries like KBS Builders and EdgeBuilder-Glenbrook. By merging, they create a hybrid model: a $210 million pro forma revenue powerhouse with the agility to serve both Fortune 500 corporations and specialized employers.

The merger’s $2 million in annualized synergies—realizable within 12 months—highlight the low-hanging fruit of cost consolidation. Eliminating redundant corporate overhead (e.g., dual investor relations teams, compliance functions) and combining back-office operations will free up capital for growth. But the real prize lies in cross-selling opportunities: Hudson’s RPO platform can now leverage Star’s construction and energy expertise to win contracts in sectors hungry for skilled labor. Conversely, Star’s clients gain access to Hudson’s global talent networks, expanding their geographic reach.

Valuation: A Discounted Gem with EBITDA Multiple Upside

The combined entity’s $40 million EBITDA target by 2030 represents a staggering 100% increase from its current trajectory. Yet, the stock market has yet to price in this potential. At the time of writing, Hudson’s trailing EBITDA multiple is 8.5x, far below the sector average of 12–15x for peers like Adecco (ADEN.S) or Randstad (RAND.AS).

The disconnect is puzzling. The merger’s accretion math is compelling: the $0.57 incremental pro-forma EPS from synergies alone suggests a material upside to Hudson’s current EPS of $2.30 (estimated for 2024). Even more critical is the $240 million in combined NOLs, which will shield NewCo from federal taxes for years, effectively boosting free cash flow by millions annually. This tax shield, combined with the elimination of Star’s standalone tax liabilities, creates a de facto 15–20% earnings boost embedded in the deal.

Risks? Manageable, Not Showstoppers

Critics may cite regulatory hurdles or integration challenges, but both companies have built-in safeguards. Their 4.99% ownership caps prevent activist investors from disrupting NOL utilization, while the staggered board—featuring Hudson’s CEO Jeff Eberwein and Star’s COO Rick Coleman—ensures continuity.

The real risk? Overpaying for the stock post-merger. But here’s the kicker: Star shareholders receive just 0.23 shares of Hudson for each STAR share, implying a 40% premium to STAR’s 20-day VWAP. This asymmetry creates a floor for upside: if synergies underperform, Hudson’s core business remains intact; if they overdeliver, the stock could surge.

Act Now: This Merger is a Buy-and-Hold Opportunity

Investors should view dips below Hudson’s $12.50 pre-announcement price as a buying opportunity. The merger’s structural advantages—a diversified revenue stream, tax-advantaged capital structure, and scalable platform—position NewCo to command a higher multiple in the coming years.

The bar is clear: execute on synergies, maintain NOL integrity, and capitalize on the RPO market’s 6–8% annual growth. With a $210 million revenue base and a merged management team owning 24% of the equity, alignment is strong.

Final Verdict: Buy on Dips, Hold for the Long Game

This merger is not just about consolidation—it’s a blueprint for leadership in a sector ripe for disruption. With a $40 million EBITDA target, a tax shield worth billions, and cross-selling potential yet to be fully tapped, Hudson’s stock is primed to outperform. For investors, the question isn’t whether to bet on this combination—it’s how much.

Disclosure: This analysis is for informational purposes only and not a recommendation to buy or sell securities. Always conduct your own research.