 M&A activity held up surprising well during the first half of 2023, with 155 announced acquisitions. This is not far off the robust levels seen in the dealmaking boom of the 2021-2022 post-Covid era. Buyers have remained active, and valuations have shown signs of recovery after contracting by c. 35% last year.
Growth remains the primary valuation driver for M&A. However, increasingly it is assessed in conjunction with capital efficiency, profitability, or with the potential for a business to achieve breakeven in the near term. Equity funding reached $6.1 billion in the first six months of the year, putting 2023 on track to be the third best year in terms of funding for the sector. However, this amount was invested across 274 transactions, which is a record low number of deals for the sector.  LONDON, UK and COLMAR-BERG, LUXEMBOURG, June 19, 2023 – Venero further strengthens its unmatched expertise in HR Technology M&A with the appointment of Thierry Vanbever as Managing Director, European Coverage.
With more than 30 years of experience, Thierry is a highly regarded M&A and corporate development practitioner with a deep focus on HR Technology and Payroll Services. Prior to Venero, Thierry spent 15 years at SD Worx, one of Europe's largest providers of People Solutions, most recently as Director of M&A and Alliances, and Managing Director International, responsible for the development of SD Worx across key European markets.  SAN FRANCISCO, CA and PARIS, FRANCE – June 7, 2023 – Clevy, a Paris headquartered international provider of AI conversational technologies for businesses, has been acquired by Fountain, the San Francisco headquartered leading Labour ATS and provider of hiring automation software for the hourly workforce.
 Work Tech vendors have been investing in AI for years, yet generative AI will disrupt the Future of Work more quickly than people anticipate, and the impact will be much more pronounced.
In this report we discuss why and how Generative AI will fundamentally change the competitive landscape, and why Work Tech vendors will need to establish a different competitive moat. We dive into the state of the Work Tech market, Generative AI use cases, early product releases, risks, limitations, as well as implications for M&A and VC funding. The report also looks at the impact of inflation, layoffs, lack of VC funding and tightening budgets on Work Tech vendors, and the outlook for M&A and fundraising. Current risks and limitations notwithstanding, the AI genie is now out of the bottle. As with other paradigm-shifting innovations, like the rapid democratization of the Internet following the release of the first Mosaic web browser, all vendors should take note and carefully assess the impact Generative AI is likely to have on their business.  Venero Capital Advisors is organising an online webinar on How ChatGPT and Generative AI can be used in HR Tech.
The session will be led by Chris Collins, founder of RoboRecruiter (acquired), who now helps businesses integrate AI, Large Language Models and ChatGPT into their product offerings. Chris will provide an overview of ChatGPT's capabilities and will demonstrate relevant use cases for HR Tech vendors, including using its API's to create plugins. Topic: Using ChatGPT in HR Tech View recorded session, on-demand: Click here  It may not feel this way, but Work Tech is gearing up for a robust M&A recovery in 2023. Following a pause in new process launches last year, there is a notable uptick in businesses looking to explore strategic options this year. For some this is a necessity, with venture funding less abundant and some customers, particularly in tech, tightening their purses. For others, KPI’s have remained robust, and coming to market is a choice contingent only on sentiment improving – or at least stabilizing.
In terms of numbers, 47 Work Tech acquisitions were announced in Q1 2023. This is a c. 45% drop compared to the 84 per quarter, on average, announced during the previous four quarters. Considering the c. 6-9 month lag between an M&A process launching and it being announced, today’s numbers reflect last year’s slowdown.  Venero Capital Advisors is a proud sponsor of the Innovation Stage at Transform2023. The conference's evolution into a people-driven thought leadership ecosystem for HR Tech and Work Tech represents everything we love about Transform and more.
Join us in Las Vegas at Transform 2023 as we, together, inspire more meaningful connections, celebrate more impactful innovations, and spark deeper conversations that will continue to shape the future of work all year long.  Companies interested in tapping the debt financing market should note that lenders today are equipped with all-weather intelligence and decision-making frameworks. This facilitates continuity of lending activity during periods of high or low inflation and interest rates, positive or negative economic outlook, financial and geopolitical disruptions, and the likelihood of corporates' distress. As such, 2023 is unlikely to mark a departure from the lenders’ strategies and tactics of 2022. Instead, we are seeng creative approaches to debt financing structures, increased enthusiasm for quality deals and a greater focus on earlier start to relationship-building with borrowers.
 The macro narrative in 2022 was dominated by high inflation, the possibility of an economic recession, and disrupted asset values, particularly high-valued technology stocks. For HR Tech and Work Tech businesses, this narrative had the most profound impact on capital raising, which saw volumes drop to $2.0bn in Q4, levels last seen in Q2 2020, at the peak of the Covid-19 pandemic. However, total funding in 2022 was $19.4bn – a record amount, eclipsed only by the $46.1bn raised in 2021 and higher than the $12.7bn raised in 2020. M&A volumes remained resilient for most of the year, with the effects of the adverse market sentiment not appearing until Q4, reflecting the slowdown in new deal originations earlier in the year.
As we move into 2023, we expect that these themes will continue to affect sentiment in HR Tech and Work Tech. However, their impact will likely change due to the swift tightening of monetary policy in the US and Europe, which has started to affect a range of areas in the economy and capital markets, including inflation, consumption, employment, and business investment. If inflation in the US and Europe continues to decline without a sharp increase in unemployment, this would imply a higher probability of a much-desired soft landing–a scenario that many thought very unlikely just a few months ago.  LONDON, PARIS, BERLIN, LOS ANGELES, 9 January, 2023 – In 2022 Venero Capital Advisors ranked as the #1 HR Tech focused M&A and corporate finance advisor globally by deal volume. The firm has been delivering almost a deal per month on average and in the last two years completed 17 M&A, debt financing, and equity financing advisory transactions for HR Tech and Work Tech businesses across Europe, N. America and Australasia – a track record that is by far the largest within the HR Tech sector compared to any other investment bank.
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