A record $5.2Bn was invested in Work Tech during 1Q 2021 across 172 deals – all-time high levels both in terms of volume and value. The average investment size continued to grow, reaching $31.4M vs. $21.2M in the previous quarter. In terms of M&A, several major vendors pursued acquisitions, taking advantage of market conditions. 52 acquisition were announced in total – a slight pullback compared to the peak of 4Q 2020 but still high compared to historical levels. In the public markets, median valuation multiples for pure Work Tech companies expanded 19% to 9.0x CY2021 revenue vs. the end of Q4 ‘20. Productivity businesses pulled back from their peak, contracting by 25% over the same period, while valuation multiples for Diversified Work Tech and HR Services remained broadly stable.

M&A activity continued to recover in December with 20 Work Tech acquisitions announced, including the acquisition of Slack by Salesforce and Pluralsight by Vista. This brings the total number of acquisitions for Q4 2020 to 56 – levels not seen since the peak of 2019. Investments in Future of Work businesses totalled $967M in November across 27 deals, with average investment size of $35.8M. Investments were broad-based, with propensity towards Productivity and Talent Acquisition.

November was a near-record setting month for WorkTech M&A activity, with 20 transactions announced globally. This included Vettery's acquisition of Hired.com, Vonq's acquisition of IGB, OutMatch's acquisition of Checkster, iCIMS' acquisition of EASYRECRUE and SmartRecruiters' acquisition of jobpal. Public trading valuations for pure HRTech firms closed at a record average of 10.7x CY2020 revenues. ​Investments in Future of Work businesses totaled $542M in November across 40 deals.

In October SAP announced lower outlook for the year causing some concern regarding the wider enterprise software sector. Results reported by other Future of Work businesses, however, suggest a largely stable business environment. Recruitment firms are the notable exception, most of whom expect a 15-20% YoY revenue decline for 2020 and c. 10% growth for 2021. M&A activity has recovered almost fully, while private placements have returned to 2019 levels. Valuations are back to their 2019 highs and the sustained Work Tech tailwinds that we see heading into 2021 are extremely encouraging. 

As expected, September saw a strong recovery both in M&A and private placements for Future of Work businesses. Revenue growth outlook for 2021 is now in-line with pre-Covid levels. Public market valuations reached new highs, particularly in the Productivity and pure HR Tech segments. Private markets seem to be following suit, with M&A tailwinds expected in Q4 and likely also into Q1, particularly as those acquirers who placed a blanket M&A freeze for 2020 re-enter the fray. 

August saw a notable uptick in both M&A activity and private placements for Future of Work businesses, with CD&R’s $4.7bn acquisition of Epicor and HG’s $2.0bn investment in Visma standing out. Most companies reported results ahead of expectations and a cautiously optimistic outlook for 2020. Valuation multiples for pure HR Tech and Productivity companies are reaching new high’s, while Diversified HR Tech and HR Services remained relatively stable.

Fintech firms continue to add new product lines catering to gig economy workers and to expand their offering, both organically and through M&A. Banks and lenders are leveraging Lending as a Service to surface their products and services on platforms outside of traditional banking channels. Companies that started with B2B2C models for gig platforms are now targeting the entire gig economy. The launch of Payments as a Service has increased speed to market and resulted in greater competition. This client briefing note describes how the gig economy is driving the next wave of fintech.

Venero's July 2020 update for HR Tech M&A and fundraising activity, valuations and peer benchmarking. Review of job market activity by country, and earnings report excerpts from publicly listed Future of Work businesses.