Human Capital Management
Q1 HCM SUMMARY & OUTLOOK
During the first quarter of 2022, fundamentals in the Human Capital Management industry continued to benefit from a strong labor market. That being said, we may be seeing the first signs of storm clouds on the horizon, as inflation concerns, rising interest rates and public market volatility promise to present some headwinds. For the moment though, capital remains abundant and transaction activity continues to be robust. Venture capital investment remained high in the first quarter but below the blistering pace of last year’s second half. Likewise, investment in M&A remained elevated but slightly down from the record highs reached during Q4 2021.
Staffing: IT and Healthcare in Demand
Transaction activity in the staffing sector remains robust amidst strong fundamentals and continued demand from consolidators. HireQuest, a national franchisor of commercial staffing services, completed three acquisitions in the past quarter, adding scale in executive search and commercial staffing. However, it was the IT and healthcare sectors that led transaction volumes in the quarter. For example, Futuris acquired IT staffing provider Cadan Technologies and also acquired Affordable Rehab Services, provider of therapy staffing services. Private equity firms also have continued interest in scaled staffing firms with robust offerings. In January, Trilantic North America re-invested in Addison Group, a national professional services firm, while P2P Staffing also received a new majority investment from A&M Capital Partners, as both firms continue to invest in national expansion.
Core HR: Financial Wellness as a Benefit
Innovative benefits - and the technologies that enable them - take center stage as employers compete to attract and retain top-tier talent. While higher wages are part of the solution, benefits such as earned wage access (EWA) are increasingly coveted, especially among hourly workers. Financial wellness platform and provider of earned wage access Branch raised a $75M Series C that valued the company at $300M. Fellow earned wage access provider Refyne raised an $82M Series B led by Tiger Global Management. We have also seen strategics acquire EWA capabilities, as Walmart joint-venture Hazel acquired Even earlier this year. More broadly in the benefits arena, in one of the headline deals of the quarter, TriNet Group acquired Zenefits for $220M. The transaction will allow TriNet to streamline workflows and connect benefits to engagement, payroll and time & attendance. Cross-border and global solutions for hiring, benefits and pay are also gaining attention, reflecting the needs of a more geographically fluid workforce. In two relevant transactions, Vista Equity invested $200M in Globalization Partners and General Atlantic invested $287M in France’s PayFit
Talent Acquisition: Recruitment Automation & Hiring Efficiencies
The difficult hiring market continues to favor recruitment automation platforms. During the quarter, VC investors dedicated over $1B to talent acquisition, with the largest investments targeting AI and automated hiring solutions. Developer of AIpowered talent search and matching engine SeekOut raised a $115M Series C round, led by Tiger Global. Recruitment automation platform Gupy tapped a $90M investment from SoftBank to acquire its main competitor Kenoby iCIMS acquired Candidate.ID, an automated recruitment marketing platform that uses AI to target candidates that best fit a role. Following its $200M Series F, Handshake acquired TalentSpace, a virtual recruiting events platform, to broaden the college career network’s platform and provide efficiencies to the college recruiting process.
Talent Management: Learning & Development
Employers are leveraging e-learning, training and development solutions to upskill and retain existing employees. In Q1 2022 alone, over 30 transactions and more than $1.3B targeted learning and development solutions. Notably, Cornerstone OnDemand acquired EdCast, a learning experience platform, to expand its learning solution and offer a mature, end-to-end skills engine. eLearning Brothers completed two acquisitions in January of 2022: first acquiring Rehearsal, a training platform focused on sales and communication skills, followed by Origin Learning, provider of learning content and curriculum design. Learning management system provider Docebo expanded its platform and geographic reach into the Asia-Pacific region with its acquisition of Skillslive. Performance management platform Lattice received a $175M investment from Tiger Global. Also of note, Pearson’s $200M acquisition of Credly, the digital credentialing and verified skills platform, highlights the rise of skills credentialing as an important complement to - or potential replacement of - more traditional education credentials. Finally, we also expect to see new areas of training within Corporate Social Responsibility (CSR) and Environmental, Social and Governance (ESG) gain traction. Most recently, “social good” software provider Blackbaud (NAS: BLKB) acquired Everfi to deliver training topics such as financial literacy and DE&I to K-12 and workforce audiences.
HCM PUBLIC MARKETS
HVA’S Q1 2022 HCM QUARTERLY REPORT
COMPARATIVE MEDIAN REVENUE MULTIPLES
TTM Median Revenue Multiples
TTM Median EBITDA Multiples
12/31/2021 3/31/2022
Source: PitchBook, Data as of March 2021 TTM
12/31/2021 3/31/2022
Source: Refinitiv
Indices based on equal-weighted prices and comprised of: HR Tech | ADP, ASUR, BNFT, CDAY, DHI, FC, HSII, HSTM, KFY, NSP, ORCL, PAYX, PAYC, PCTY, SAP, SGE, TNET, WDAY, XM
Staffing | AMN, ASGN, BBSI, BGSF, CCRN, JOB, KELYA, KFRC, MAN, MHH, RGP, RHI, STAF, TBI, VOLT
Excludes companies not traded prior to 3/1/2021
HCM PUBLIC TRADING STATISTICS
HVA’S Q1 2022 HCM QUARTERLY REPORT
CORE
n/m: multiples less than 0x or greater than 50x Source: PitchBook
TALENT MANAGEMENT
TALENT ACQUISITION
STAFFING
HCM M&A SUMMARY
MAR 2022 $750M JAN 2022 $370M JAN 2022
FEB
Sources: PitchBook, SIA
HR M&A TRANSACTIONS
Source: PitchBook
TALENT MANAGEMENT
HR M&A TRANSACTIONS
HVA’S Q1 2022 HCM QUARTERLY REPORT
TALENT MANAGEMENT (CONT.)
TALENT ACQUISITION
STAFFING M&A TRANSACTIONS
STAFFING
Sources: PitchBook, SIA
HCM FINANCING TRANSACTIONS
JAN 2022 $200M JAN 2022 $200M FEB 2022
Source: PitchBook
HR TECH UNICORN TRACKER
HVA’S Q1 2022 HCM QUARTERLY REPORT
Q1 2022 NEWLY MINTED UNICORNS
HR TECH UNICORNS
Source: PitchBook
HCM VENTURE CAPITAL ACTIVITY
HCM VENTURE CAPITAL ACTIVITY
EARLY-STAGE VENTURE CAPITAL (CONT.)
Jan-22
HCM VENTURE CAPITAL ACTIVITY
Feb-22
Feb-22
Feb-22
Jan-22
Jan-22
Jan-22
Jan-22
Jan-22
Jan-22
Jan-22
Jan-22
Jan-22
Jan-22
Jan-22
Jan-22
Jan-22
Workforce Management
Employee Engagement Learning Payroll
Compensation and Benefits
Leadership Development
Performance Management
Pre-Employment Screening Onboarding
Sources: PitchBook, HRTECH Feed
SUB-SECTOR SPOTLIGHT: BENEFITS & WELLNESS
HVA’S Q1 2022 HCM QUARTERLY REPORT
A historically tight labor market has increased the importance of a robust and innovative suite of employee benefits, and the pandemic’s enlightenment regarding wellbeing has elevated wellness-related benefits to the high-priority realm. Guardian’s Workplace Benefits Study emphasized the importance of normalizing mental, physical and financial health needs. Be it mental & physical health, workplace safety or financial wellness, employers are seeking new ways to retain and attract talent via wellbeing solutions.
Physical Wellbeing:
Employers offer physical health and safety solutions to promote a healthy and productive workforce and reduce health insurance costs. Movespring, an employee wellness platform that promotes physical activity, was acquired by Reward Gateway to bolster its employee engagement solutions. Providers targeting industries with increased regulation for employee health and safety are receiving interest from institutional investors. For example, US Mobile Health Exams, a provider of mobile employee health testing for OSHA regulated companies, was acquired by Potomac Equity Partners.
Mental Wellbeing:
The pandemic spurred awareness and investment surrounding mental health as well as physical wellbeing of employees, making mental health solutions one of the top employer priorities in 2021. The interest continues in 2022. According to the Guardian study, employers who have increased their investment in mental health benefits achieved a 50% increase in retention. Workplace mental health platform Lyra raised a $235M late-stage round, led by Dragoneer Investment Group. On the M&A side, mental health and wellbeing provider, LifeSpeak acquired Wellbeats for $93M, marking the company’s fourth acquisition in 9 months.
Financial Wellbeing:
The overall employee wellness landscape has seen a lot of investment within the past year, but recently there has been a surge of venture investment into financial wellness solutions. Several platforms for financial wellness have raised significant rounds in 2022, most of which are addressing financial literacy, financial coaching and earned wage access for employees. As highlighted in our quarterly round up, Refyne, provider of earned wage access for salaried and contract workers, raised an $82M series B round led by Tiger Global. Walmart-backed Hazel acquired two fintech platforms: Even and ONE. The former is a financial benefits platform that provides employees access to earned wages, budgeting and saving, while the latter is a direct-to-consumer platform that combines saving, spending and borrowing into one digital account. Moreover, earlier companies continue to enter the space and receive funding, such as provider of earned wage access and financial education Wagely, who raised an $8M seed round led by East Ventures.
The interest in employee wellness has led to an increased emphasis on comprehensive and streamlined benefits management for employees. Several illustrative deals took place during the quarter, the most significant being TriNet Group’s acquisition of Zenefits, an HR solution that encompasses payroll, benefits, compliance and performance management. In addition, Vera Whole Health acquired benefits provider Castlight Health for $370M. And Betterfly, a holistic wellbeing, health insurance and social impact platform, raised $125M series C, led by Glade Brook Capital Partners at an $875M valuation. We expect robust investment in the wellness and benefits segment to continue in the near term and the range of solutions to broaden as the definitions of wellness, benefits and social impact expand.
Source: Mind, Body, and Wallet: Workforce wellbeing in the pandemic era Guardian
HUMAN CAPITAL MANAGEMENT TEAM
Carolyn Mathis PARTNER
Margaret McCormick VICE PRESIDENT
Nick Mignone ASSOCIATE
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