A total of $9.2Bn was invested in WorkTech and HR Tech during Q1 2022 across 205 deals. The average investment size contracted to $48.4M vs. $60.9M in the previous quarter, indicating a reversion to the mean after an abundance of later-stage financings in 2021. 

​In terms of M&A, 48 WorkTech acquisitions were announced this quarter – a sizeable decrease compared to Q4 '21. In part, this reflects the macroeconomic and geopolitical uncertainty that caused some transactions to be delayed. Nonetheless, M&A sentiment remains positive heading into Q2. Notable transactions included the announced acquisition of Anaplan by Thoma Bravo, and the acquisition of EdCast by Cornerstone.

In the public markets, trading multiples for high-valued Workplace Productivity businesses contracted in Q1, in line with much of the broader technology sector. Pure WorkTech companies as well as their Productivity and Diversified WorkTech peers contracted by 32%, 27% and 13% respectively. Valuation for HR Services businesses showed greater resilience, expanding slightly.

Valuation multiples for publicly-listed Workplace Productivity businesses contracted in Q4, in line with much of the broader technology sector. Median valuations for HR Services and Diversified WorkTech showed greater resilience, expanding by 28% and 13% respectively. In terms of M&A, 70 WorkTech acquisitions were announced, a c.9% increase compared to the previous quarter with significant interest in Talent Acquisition as well as Workforce Management assets. Private Equity was involved in c.7% of transactions. Investment volumes remained elevated, with more than $11.1Bn invested in the sector across 190 deals. The average investment size continued to grow, reaching $62.2M vs. $56.8M in the previous quarter.

WorkTech is going from strength to strength, with $12.9 billion invested into the sector last quarter across 230 transactions. Average investment size continues to increase, driven by major investments such as $1.5 billion into Articulate (online training) and $1 billion into Visma (​core business software). M&A activity remained elevated, with 61 transactions being announced – a slight decline compared to the previous three quarters but still well above 2020 and even 2019 levels. Major transactions this quarter included Cegid's acquisition of Talentsoft, Blackstone's acquisition of Simplilearn and ​Veritone's acquisition of Pandologic. Median trading valuation for WorkTech businesses expanded to 10.9x, driven by the successful IPO’s of Freshworks and Paycor. The median trading multiple for Productivity vendors was volatile, impacted primarily by Zoom and the IPO of Monday.com.

Q2 2021 was the second consecutive record-breaking quarter for WorkTech, with $8.9 billion invested in the sector globally across 200 transactions. This compares to $5.3 billion across 178 transactions in the previous quarter. There were more than 30 funding rounds in excess of $100 million, primarily in Business Management, Compensation & Benefits, Core HR & Payroll, Corporate Learning & Development, Talent Acquisition and Productivity. 

M&A activity in the quarter was in line with Q1 2021. There were 63 transactions and $12 billion of announced value. Private Equity was involved in 23% of acquisitions, with particular interest in Corporate Learning and Talent Acquisition.

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.