Human Capital Management
VC investments soared in the third quarter and reached a second consecutive all-time high of $5.7B, up more than 80% over Q2. The number and aggregate value of investments between $20M and $100M nearly tripled in Q3 compared to Q2 M&A also set a record with over 75 closed transactions, the majority occurring within Talent Management and Staffing verticals The eight strategic acquirers below made more than one acquisition in the quarter
Q3 Active Acquirers
Staffing: Vibrant M&A Market Across All Dimensions
Sustained supply shortages and COVID-related constraints are exacerbating an already-raging battle for talent and further driving widespread strategic M&A activity within the staffing industry. Active consolidators have continued to push into higher-margin specialty areas of staffing, recently demonstrated by ManPowerGroup’s acquisition of technology- and healthcare-focused Ettain Group and Randstad’s acquisition of digital marketing-focused Cella Additionally, new technologies are being introduced into the staffing universe at an incredible rate, and established bluechip players have intensified their quests for new features and capabilities, highlighted by HireQuest’s acquisition of multi-media creation platform Recruit Media and Avionte’s acquisition of mobile staffing software Workn However, nothing has been more indicative of the current state of the talent arms race than non-staffing companies directly partnering with or outright acquiring staffing firms. Examples include renewable energy solutions provider Motive Companies partnering with technical staffing firm Two Roads and fan monetization platform Patreon acquiring startupfocused recruitment services firm Clear Talent.
Talent Acquisition: Employee Referrals & AI Tools Deliver Results
There were 10.4 million open jobs at the end of August, and in most fields, there were more open roles than workers with relevant experience Employers, desperate to find candidates, are looking to new solutions to expand the network of available talent Referral-based hiring has been shown to shorten time to hire and often results in higher employee retention. Traditional recruiting companies entered the space, as Hireology acquired EmployUs – a solution that allows employees to send referrals and earn rewards Similarly, online job marketplace Instawork and recruitment platform TopFunnel each acquired employee referral capabilities with the acquisitions of Drafted and Teamable, respectively Employers also found new AI-driven skills matching tools to “screen-in” talent and AI-powered skills engines that correlate skill adjacencies to pair talent with broader roles. Recently, notable players deploying AI for hiring and talent intelligence raised late-stage funding: Beamery and Gloat completed Series C rounds and Eightfold raised its Series E
Learning: Upskilling and Coaching Advance the Workforce
Building off the challenges faced by hiring teams in a tight labor market, Learning and Development departments are focusing on internal mobility and leveraging career arcs to upskill the existing talent base and reduce the need for external talent Learning and coaching platforms are elevating employee skillsets as jobs transform at an accelerated rate and coaching becomes accessible to the broader workforce For example, LinkedIn’s recent Skills Path pilot is leveraging data-driven skills insights to supplement gaps with LinkedIn Learning courses. Notable investment activity included corporate learning platform Schoox’s growth investment from Vista Equity Partners and e-learning authoring company Articulate’s $1 5B Series A raise Coaching and mentoring solutions continued to receive interest with Chronus’ investment from Level Equity. CoachHub closed a $80M Series B and subsequently acquired digital coaching platform MoovOne Coaching unicorn BetterUp raised a $300M Series E at a $4 4B valuation and gained performance management and emotion measurement capabilities with its acquisitions of Impraise and Motive Software, respectively
Core HR & Benefits: On-Demand Pay Becomes Key Financial Wellness Benefit
Earned wage access solutions have received over $1B in funding this year as employers look to differentiate themselves and boost employees’ financial wellness, an important pillar in overall employee health. Employees can choose pay frequency as practices from the gig economy cross over into hourly and salaried positions. To the right, we have highlighted on-demand pay players that raised capital this year
Recently VC-Backed Earned Wage Access Players
HCM PUBLIC MARKETS
COMPARATIVE MEDIAN REVENUE MULTIPLES
Source: PitchBook, Data as of September 2021 TTM
ONE-YEAR HISTORICAL INDEX PERFORMANCE
Source: Refinitiv
Indices based on equal-weighted prices and comprised of: HR Tech | ADP, ASUR, BNFT, CDAY, CSOD, DHI, FC, HSII, HSTM, KFY, NSP, ORCL, PAYX, PAYC, PCTY, SAP, SGE, TNET, WDAY Staffing | AMN, ASGN, BBSI, BGSF, CCRN, JOB, KELYA, KFRC, MAN, MHH, RGP, RHI, STAF, TBI, VOLT
HCM PUBLIC TRADING STATISTICS
CORE HR
TALENT MANAGEMENT
TALENT ACQUISITION
STAFFING
n/m: multiples less than 0x or greater than 50x
Source: PitchBook
TALENT MANAGEMENT
Source: PitchBook
HR M&A TRANSACTIONS
TALENT MANAGEMENT
TALENT ACQUISITION
Source: PitchBook
STAFFING M&A TRANSACTIONS
HCM FINANCING TRANSACTIONS
LEARNING PLATFORM TALENT MANAGEMENT
SCREENING PLATFORM
$250M SEP 2021
RECRUITING PLATFORM
$250M SEP 2021 $100M AUG 2021
SECOND CONSECUTIVE QUARTERLY RECORD FOR FINANCINGS
Source: PitchBook
EARLY-STAGE VENTURE CAPITAL (CONT.)
LATE-STAGE VENTURE CAPITAL
Between the whiplash of fast-moving conditions and grave events that transpired over the pandemic, employees are seeking relief by voluntarily changing jobs or leaving the workforce altogether. As a result, the employee experience is now a strategic priority due to the prospect of large increases in employee turnover. For example, 4.3 million workers voluntarily left their jobs in August Employers were already intent on keeping employees engaged pre-pandemic, and the need has only accelerated The employee experience has transformed through recent consolidation and institutional investments, and this has resulted in more holistic, integrated solutions.
The employee voice has never been more amplified given recent investment in employee listening tools. Employers look to gain insights from employees and address shortcomings compared to industry benchmarks. Workday’s acquisition of people analytics leader Peakon began a quick succession of transactions within culture management solutions. Perceptyx enhanced its leadership position in employee listening and culture management through its acquisitions of CultureIQ and Waggl. Ultimate Kronos Group acquired workplace culture specialist Great Place to Work. Executive search firm ZRG Partners acquired culture consultancy Walking the Talk On the venture funding side, employee experience platform Culture Amp raised a $100M Series F at a $1.4B valuation.
Employee communication continues to be a top priority as hybrid work arrangements remain in place. Engagement of frontline workers, who employers struggle to engage even in non-crisis conditions, has become even more critical as they have felt the effects of the pandemic most directly. Workforce communication players Social Chorus and Dynamic Signal combined to create a digital employee experience platform centered on productivity and wellbeing. Communications platforms WorkJam, Simpplr and InvolveSoft raised capital in the third quarter to address these challenges. After receiving an investment from Marlin Equity, social intranet company Coyo acquired Finnish communication platform Smarp and French engagement analytics company Jubiwee to expand its geographic reach and capabilities
As the employee experience evolves and the definition of a benefit broadens, companies look to expand and integrate offerings across the spectrum. Recently, wellbeing and engagement platform Limeade acquired employee listening capabilities through its TINYPulse acquisition, and performance management suite 15Five added employee engagement through the acquisition of Emplify Abry Partners and Castik Capital entered the space earlier in 2021 through the acquisition of engagement platform Reward Gateway. Rewards and recognition leader Terryberry continued its active M&A strategy and global expansion through the acquisition of UK-based iCOM Reward Works earlier in the year.
HVA SUCCESSFUL EMPLOYEE EXPERIENCE OUTCOMES
HR TECH & BUSINESS SERVICES TEAM
Nick Mignone ASSOCIATE
Bernard Neret ANALYST
Scott Pepis ASSOCIATE
Matthew Iftime ANALYST
Jonathan Hollis VICE PRESIDENT
Tyler Lamer MANAGING DIRECTOR
Margaret McCormick VICE PRESIDENT
Carolyn Mathis PARTNER
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