Human Capital Management Technology Market Update

Human Capital Management (HCM) Technology Industry Overview

  • The third quarter of 2018 featured 38 M&A transactions in the HCM technology space—another strong quarter of activity. Notable deals included Vista Equity Partners acquisition of iCIMS, The Ultimate Software Group’s acquisition of PeopleDoc, New Mountain Capital’s acquisition of Beeline, and Morneau Shepell’s acquisition of LifeWorks Corporation.
  • The tight labor market is driving strong demand for HCM technology solutions. In particular, employers are prioritizing talent acquisition and management tools that increase connectivity with contingent workers and help identify internal and known talent, as well as streamline the recruiting process. In terms of workforce management, employers are focused on productivity and collaboration enhancers, automated risk management and compliance tools, and benefits and wellness platforms.

Harris Williams Market Analysis: Global Health and Wellness

HCM Technology Acquisition Activity1,2

Key Strategic Acquirers of HCM Technology Assets by Volume

  • The key strategic acquirers have combined for 36 HCM technology related acquisitions since 2015, but two of them (IBM and Oracle) have not completed a HCM acquisition since 2016
  • Key acquirers announced or completed three transactions in Q3: Workday / Stories A.R.O., Workday / Adaptive Insights, Ultimate Software / PeopleDoc, and ADP / Celergo

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Global HCM Technology M&A Activity

  • HCM M&A experienced another strong quarter with 38 transactions, as M&A activity remains elevated
  • HCM technology companies remain highly attractive to both strategic and financial acquirers
  • Deal volume is robust supported by tuck in acquisitions and platform building

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Select HCM Technology M&A Transactions – Q3 20182,3,4

screen_shot_2018-10-12_at_3.47.58_pm.pngVista Equity Partners has Acquired iCIMS

  • iCIMS is a leading provider of cloud-based talent acquisition solutions supporting hiring initiatives of more than 3,500 customers on its talent acquisition platform, including 7-Eleven, Enterprise Holdings, Southwest Airlines, and Rite Aid.
  • The Company’s offers true enterprise end-to-end talent acquisition platform through the use of user-friendly technology, enabling growing organizations to manage their entire candidate management lifecycle within a single SaaS application.
  • With Vista Equity Partner’s support, iCIMS will continue to establish itself as a market leader in the talent acquisition solution market.

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Arcoro has Acquired ExakTime

  • ExakTime provides a time tracking platform designed for employers to manage their mobile workforce.
  • The Company’s cloud-based timekeeping platform provides easy access from any location and powerful reporting, enabling high consequence industries to streamline operations, save business time, and ensure compliance.
  • As part of the overall platform strategy, Providence has created Arcoro Inc. - a human capital management (HCM) software and services provider. ExakTime and BirdDogHR (another Arcoro company) have natural synergies that will continue to streamline employee management operations.

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Morneau Shepell has Acquired LifeWorks

  • Lifeworks Corp, provides employee assistance, wellness recognition and incentive programs.
  • The Company's employee engagement platform is designed to provide financial wellness, employee assistance, employee recognition, and employee communication programs with real-time data and insights.
  • The acquisition of Lifeworks supports Morneau Shepell’s Employee Support Solutions products and will provide superior user experience and clinical support to achieve complete mental, physical, social, and financial well-being.

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Ultimate Software has Acquired PeopleDoc

  • PeopleDoc provides a comprehensive HR Service Delivery platform that enables HR organizations to serve employees anytime, anywhere, with the ability to easily answer employee requests on demand, automate employee processes, and manage document acknowledgment and storage.
  • The Company serves more than 1,000 customers representing over four million end users.
  • Ultimate Software will leverage PeopleDoc’s technology and innovative platform across its 4,000+ enterprise clients and tens of millions of end users.

screen_shot_2018-10-12_at_3.53.02_pm.pngNew Mountain Capital has Acquired Beeline

  • Beeline is the world's largest independent provider of cloud-based vendor management solutions helping Fortune 2000 companies manage their non-employee workforces.
  • The Company’s enterprise-grade, end-to-end sourcing, workflow, and decision-optimization platform allows employers to effectively manage their extended workforce.
  •  The partnership with New Mountain will provide Beeline with significant strategic resources and financial capital to accelerate Beeline's innovative product roadmap, expand globally, and best meet customers' evolving needs.

Recent HCM Software Transactions1,2

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Multiples less than 0.0x or greater than 30.0x are deemed NM or Not Meaningful

Select Recent HCM Private Placements1,2,3

Financing Spotlight Transaction​

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Gusto Raises $140m from T. Rowe Price, Y Combinator, MSD Capital, and Dragoneer Investment Group

  • Gusto (formally ZenPayroll) provides payroll, benefits, human resource, and integration services for employers and employees, enabling businesses to provide employee benefits like health insurance and 401(k) plans.
  • Gusto’s latest $140 million round of funding was led by new investors T. Rowe Price, Y Combinator, MSD Capital, and Dragoneer Investment Group putting the Company’s pre-money valuation at $2 billion.
  • Gusto will use the additional funding to drive significant additions to its packaged payroll, benefits, and HR technology platform including new capabilities to help employees manage how they get paid.

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HCM Technology Market Observations1,2,3,4

Talent Acquisition and Management

Select Market Participants

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Transaction Spotlight

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Observations

  • Employee recruitment, engagement, and retention remain top of mind - especially as job market tightens
  • Data-driven / market place tools are increasing connectivity for both enterprises and their contingent / on-demand workers
  • Talent tools adopting machine learning, predictive analytics, assessment algorithms, and artificial intelligence
  • Identification and recruitment of internal and known talent are corporate strategic initiatives
  • Learning management systems and corporate learning, training and compliance content increasingly core to HR suite

In The News

The Use of AI in Combating the Talent Acquisition Problem

Upwork Increases Proposed IPO Deal Size

ZipRecruiter Raises $156m in Funding

 

Workforce Management

Select Market Participants

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Transaction Spotlight

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Observations

  • “Workforce as a Strategy” is increasingly driving companies to adopt data-driven technologies that remove friction from the employee journey
  • Benefits and payroll solutions are fundamental to employee / employer connectivity with engagement and wellness proliferating
  • HRIS automation is table-stakes as employers now shifting focus to productivity and collaboration enhancers
  • Automated and comprehensive risk management / compliance tools continue to experience strong adoption
  • Back office HR Capabilities for on-demand labor market is an emerging market opportunity
  • Leading vertical-specific platforms remain highly attractive to investors and acquirers (e.g., retail, healthcare, and hospitality)

In The News

Global Workforce Management System Market to Grow with a 19.14% CAGR

Dairy Queen and Other Top Restaurants Adopt Fourth’s Workforce Management

Coupa Software Acquires DCR Workforce

HCM Technology Market Valuation1,2

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(1) As of September 30th, 2018

Public Comparables Analysis1,2,5

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HCM Technology Taxonomy

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Strong Transaction Experience in HCM Technology

Harris Williams HCM Technology Transaction Experience

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HW’s TMT Group: M&A Advisor of Choice for Market Leading Technology Companies

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1. FactSet

2. PitchBook

3. Mergermarket

4. BusinessWire

5. HW proprietary transaction information

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