Much like in other industries, companies in the HR Tech space have seen a significant pullback in valuations compared to their February levels. This contraction in valuation multiples has impacted the HR Tech focused companies more than their diversified peers, with a 35% drop compared to 25% for Diversified HR Tech. HR Services, meanwhile, pulled back by 30% on average. 13 acquisitions were announced in March, in the US and Europe. This follows the transformational acquisition of Saba by Cornerstone, which is expected to trigger further consolidation in the space.
We are delighted to present our 2019 analysis of M&A and investment trends in the HR Tech sector. This is the second year in a row we release such a report, after the overwhelmingly positive reception of the inaugural publication.
Similar to last year, in this report we share some of the insights and observations we have gathered from working with companies and investors in the Human Capital Management space over the last 12 months. We review the most prevalent M&A and investment themes, analyse notable transactions and highlight the factors that are likely to drive corporate finance activity for HR Tech businesses going forward.
Below are the key takeaways. You can request the full report here.
Client Briefing Note:
Cybersecurity is a sector flush with fragmented technologies. M&A deal flow is underpinned by robust structural growth, transition to the Cloud, government regulations and sophisticated cyber breaches. In this context, small players with niche technologies are acquired by larger peers who need to expand their capabilities and scale their product offerings.
This briefing note looks at the main drivers of M&A activity in the cybersecurity space, reviews transaction volumes, the most active acquirers and trends such as vendor rationalization. It also explains the importance of an Advanced Security Operation Control as a driver for acquisitions and analyzes precedent transaction multiples and public trading valuations.
Most marketplaces are described using three primary characteristics: number of sides (1-sided, 2-sided, 3-sided or n-sided), geographic density and customer type (B2B, B2C, C2C). An element less frequently considered is "reciprocity". In this post we define "reciprocal marketplaces", explore their main properties and identify what is required to ensure their orderly function.
Client Briefing Note:
IBM’s announced acquisition of Red Hat in a deal with an enterprise value of roughly $34 billion at a hefty premium triggered a recovery in cloud stocks. The reason this particular transaction acted as such powerful a trigger is because it reinforced a pattern that the market has come to expect: transformational deals, outsized tech valuations and continued anxiety among the majors to remain competitive and perhaps even relevant.
This briefing note looks at the recent trends in 'cloud' M&A, the impact on acquisition valuation multiples and the expectations for further consolidation among cloud software companies in 2019.
Client Briefing Note:
Salesforce reported reported Q1 FY19 revenue growth of 25% YoY, consistent with its remarkable historical performance. The company reported double-digit growth in all relevant metrics, exceeded analyst expectations and company guidance, and raised expectations for future performance across the board. Growth is showing no signs of decelerating, despite the company surpassing $12bn in ARR.
This briefing note analyses the core pillars of Salesforce's performance, the company's latest acquisitions and the implications for Salesforce's growth strategy, competitive positioning and outlook.
Like so many other industries, the Human Capital sector is faced with continued change and disruption. From updated recruitment methods for attracting and supporting an increasingly transient workforce to employee engagement and the push towards a digital workforce experience, technology is transforming the future of work.
In the report (available here), we explore the latest HR Tech sector tends, review recent M&A and investment activity, compare valuation multiples (trading and acquisition) and analyse the strategy of key players in the space.