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Human Capital Management

Q2 2023

M&A Trends & Outlook:

Q2 HCM SUMMARY & OUTLOOK

Activity in the HCM space remains strong, albeit softer than the record levels of quarterly transactions recorded in 2021 and 2022 Specific sectors within HCM, such as Core HR, are still gaining investor attention as companies recalibrate their focus towards mission critical solutions Staffing, a cyclical sector, is down to near-record low quarterly deal count (20 deals), resulting from a looser labor market (the number of US job openings has fallen 18% year-over-year1). Despite the decrease in overall M&A activity, our outlook remains optimistic that HCM M&A will remain active from private equity investment (see Page 6) and a focus on mission critical and innovative solutions

VC Trends & Outlook:

The amount of VC activity decreased to $921M, representing the lowest levels of funding since the reactionary market conditions of 2020. This was the 4th quarter in a row with fewer than 3 newly minted unicorns, down from an average of 7 unicorns per quarter in 2021 (see Page 13). Meanwhile, generative AI companies and tech startups have demonstrated their ability to secure substantial early-stage capital, leading to more a more optimistic outlook for the remainder of the year

STAFFING

The staffing sector saw the largest decrease (-44% from 2022 averages) in M&A deals, and activity was mostly concentrated in IT and healthcare: industries that have been historically active and display resilience to shifting market conditions.

IT Staffing & Consulting:

• IT staffing firm Inspyr Solutions continued to strengthen its national presence and offerings by acquiring Ntelicor This follows Inspyr’s acquisition of ProTask in March.

• BGSF, a professional staffing firm, expanded its international operations by acquiring Arroyo Consulting, an IT staffing firm.

Healthcare Staffing:

• Jackson Healthcare, a healthcare staffing firm, met increased nationwide demand by acquiring LRS Healthcare, a specialized staffing company for nurses and allied health professionals.

• Health Advocates Network, a national supplemental healthcare staffing provider, strategically broadened its travel nurse and local staffing capabilities by acquiring Horizons Healthcare Agency, a travel nursing staffing firm.

CORE HR

The Core HR sector was responsible for 35% of transactions in the HCM industry this quarter, as companies refocus on mission-critical HR services. In the public markets, Core HR was the only sector to experience an increase in year-over-year median revenue and EBITDA multiples (see Page 2).

• Immedis, a global payroll platform provider, was acquired by workforce management leader UKG. Following the acquisition, the two companies introduced UKG One View, an AI-powered "perpetual validation" engine

• Netchex, a cloud-based HCM and payroll software provider, was acquired by GrowthCurve Capital, a private equity firm specialized in financial, healthcare, and technology sectors, to accelerate growth. Workforce Management:

• Zendesk, a service-first CRM company, acquired Tymeshift, an AIpowered modern workforce management solution, to drive the next generation of AI-assisted CX productivity.

TALENT MANAGEMENT

Although activity in talent management slowed this quarter, there were a few sizable transactions involving AI-based employee training and management solutions. The sales training space has been particularly active this year (see Page 7 for more detail).

Employee Engagement:

• Neobrain, Europe's leading AI-powered talent management solution, added scale by acquiring US-based Flashbrand, an HR performance and engagement platform.

• Qualtrics, an experience management software developer, was acquired by co-investors Silver Lake and CPP Investments for $12.5B, to expedite innovation and achieve category leadership.

Learning:

• Docebo, a cloud-based e-learning platform, strengthened its generative AI capabilities through the acquisition of Edugo.AI, a company specializing in generative AI-based learning technology.

• Sales Empowerment Group, an outsourced sales and marketing consulting firm, acquired Action Selling, a sales-training company, to provide clients with a suite of solutions across the revenue function.

TALENT ACQUISITION

Transactions in Talent Acquisition were driven by the acquisitions of innovative AI hiring platforms and online screening services.

Hiring Tools:

• Veritone, a prominent enterprise AI software and services provider, acquired Broadbean, a SaaS technology company specializing in talent acquisition. The acquisition aimed to broaden Veritone's offerings of AI-powered HR solutions.

• Comeet, a collaborative hiring platform, joined forces with Spark Hire, a video interviewing platform

Pre-Employment Screening:

• HireVue, a video interview platform, completed the acquisition of Modern Hire, a comprehensive hiring platform with screening and workflow automation tools (see Page 5 for more detail).

• Fama, an online screening platform, completed its acquisition of Social Intelligence, a social media screening software, with the goal of assisting companies in mitigating workplace misconduct.

COMPARATIVE MEDIAN REVENUE & EBITDA MULTIPLES

YoY Median Revenue Multiples

YoY Median EBITDA Multiples

Source: PitchBook, Data as of March 2023

SUB-SECTOR ECOSYSTEM

Despite the overall S&P index rising slightly, the Talent Acquisition index underperformed during this period, while the Core HR index emerged as the top-performing index for the second quarter in a row.

Source: Refinitiv

Indices

HCM PUBLIC TRADING STATISTICS

HVA’S Q2 2023 HCM REPORT

CORE

TALENT MANAGEMENT

$660M

APR 2023

ACQUIRED BY

UNDISCLOSED

MAY 2023

ACQUIRED BY

$1.2B

MAY 2023

ACQUIRED BY

UNDISCLOSED

MAY 2023

ACQUIRED BY

$12.5B

JUN 2023

ACQUIRED BY

UNDISCLOSED

APR 2023

ACQUIRED BY

$52M

MAY 2023

ACQUIRED BY

UNDISCLOSED

MAY 2023

ACQUIRED BY

Sources: PitchBook, SIA

HCM NOTABLE TRANSACTIONS

RECENT NOTABLE ACQUISITIONS

• Buck is a leading provider of pensions and employee benefits consulting, HR technology, and administration services throughout the US, Canada, and UK.

• The acquisition will provide enhanced value to the clients, as well as opportunities for growth due to the collective expertise in benefits consulting and administrative services.

• ModernHire offers screening, interviewing and assessment services, thereby enabling recruiters and hiring managers to drive faster decisions and improve the quality of hire.

• The acquisition will allow HireVue to add scale and serve a combined 1,150 customers globally, including half of the Fortune 100.

• Reward Gateway is an employee engagement platform which offers rewards and recognition, surveys, well-being, and benefits.

• The partnership will provide a complete range of employee services encompassing digital benefits, savings programs, recognition and rewards initiatives, and corporate social engagement solutions.

• Casana is a Munich-based company that provides flexible support for staffing and managing organizations digital transformation initiatives.

• By joining forces, Andela customers benefit from a larger pool of qualified technologists in Europe and can assist a greater number of companies in scaling their global tech talent strategy.

• Qualtrics helps organizations collect feedback and data across 4 sectors: Customers, Employees, Brand, and Product.

• SAP divested Qualtrics to Silverlake and CPP Investments, which will allow Qualtrics to partner with ERP vendors to broaden its overall market and bolster investments into new technologies, like artificial intelligence.

• Bigfoot Search is a technology-focused staffing firm with an extensive network of highly qualified candidates.

• The acquisition is in response to increased and consistent requests from FSP clients and will add new capabilities across product, engineering, and design to the platform.

• Broadbean is a talent acquisition software company that provides recruiters with valuable data and insights to optimize their recruitment strategy.

• The acquisition will scale Veritone’s AI-powered HR solutions business, enhance their existing HR offerings, and expedite revenue opportunities through cross-selling.

• NinjaJobs and Global People are both direct-hire search firms that specialize in cybersecurity, supply chain technology, logistics, and data analytics.

• The acquisition fulfills Starfish Partners initiative to expand into the cybersecurity industry and provides capital for scale.

TOP FINANCIAL ACQUIRERS – PAST 30 MONTHS

Acquisitions by financial buyers since December 31, 2020

of financial buyers made more than 1 acquisition in the last 30 months

Platform Acquisitions in Past 30 Months Most Recent Acquisitions

• GreenSlate (2023): Technology-enabled payroll

• Bswift (2022): Healthcare payroll

• SAP Litmos (2022): Learning management system

• Office People (2023): Staffing

• Barton & Associates (2022): Healthcare staffing

• Oxford Global Resources (2021): Specialty staffing and consulting

• BurnAlong (2023): Talent management

• Beeline (2022): Workforce management platform

• Businessolver (2021): Benefits administration technology

• KnowBe4 (2023): Cybersecurity training platform

• Schoox (2022): Interactive e-learning platform 2 • Vertical Cloud Solution GmbH (2023): Workforce management platform • Outsolve (2022): Affirmative action compliance

• Pragmatic Institute (2022): Talent management

• GHR Healthcare (2021): Healthcare staffing

• Wholesale Screening Solutions (2021): Pre-employment screening

• SJV Data Solutions (2021): Background screening platform 2

• RO Health (2021): Healthcare staffing

• Optimum Healthcare IT (2021): Healthcare IT staffing

SUB-SECTOR SPOTLIGHT: SALES TRAINING

M&A in the Sales Training space is on track for a record year, with six transactions already recorded to date This can be largely credited to the growing emphasis of skills-based training and assessments, an increasingly-virtual selling environment, and the widespread adoption of sales analysis software A focused strategy for sales training and skill development initiatives can equip sales teams with the tools and knowledge needed to thrive in the digital age, while also driving employee engagement, satisfaction, and retention. Notably, Sales Empowerment Group (SEG) recently acquired Action Selling, offering customers a comprehensive suite of virtual sales and sales assessment solutions Additionally, it is crucial to recognize the dynamic role of tools designed to improve sales visibility - applications like Salesforce, Hubspot, and Marketo not only help to streamline and optimize sales processes, but also provide valuable insights and analytics that can significantly influence sales strategies. Rising adoption of these solutions drive the need to train sales teams to best implement and leverage these tools to reach organization goals.

NOTABLE SALES TRAINING ACQUISITIONS

MAY 2023 ACQUIRED BY

APR 2023 ACQUIRED BY

AUG 2021 ACQUIRED BY

NOV

JUN 2018 ACQUIRED BY

INVESTOR INTEREST ACROSS BUYER TYPES TRENDS AND DEVELOPMENTS

Rise of Virtual Selling: Virtual selling has become increasingly important due to the evolution of technology, changing customer preferences, and the rise of remote work Over time, virtual selling has developed to incorporate more engaging experiences, data-driven insights, and specialized tools. Most recently, Lepaya, a virtual education platform, has expanded its online sales training capabilities by acquiring Krauthammer

Assessments: Assessments are a key step in the training process to assess talent capabilities and understand areas of development for an employee’s current and future role Given the remote working and selling environment, it is increasingly important to understand capabilities across remote teams to identify and provide training opportunities. Truelink Capital announced they will acquire Richardson, a sales coaching platform with behavioral and sales performance assessments

Artificial Intelligence: Artificial intelligence has the potential to revolutionize sales training by providing personalized, data-driven insights Corporate Visions recently launched an automated platform called TruVoice (APR 2023), which provides sales representatives with real-time analysis and performance tracking.1 By leveraging these AI-powered capabilities, sales training becomes more effective, efficient, and tailored to the unique needs of individual sales representatives

HR TECH M&A TRANSACTIONS

TALENT ACQUISITION

STAFFING M&A TRANSACTIONS

TALENT ACQUISITION (CONT.)

Sources: PitchBook, SIA

STAFFING

HCM FINANCING SUMMARY

& BENEFITS

$179M 2023 RECEIVED INVESTMENT FROM

& BENEFITS $100M 2023

RECEIVED INVESTMENT FROM EMPLOYEE ENGAGEMENT

$70M 2023

TALENT SOURCING

HVA’S Q2 2023 HCM REPORT

Q2 VENTURE FUNDING SUMMARY COMPENSATION AND BENEFITS DRIVES VC INVESTMENT IN Q2 2023

Communication

Employee

Recruitment

Workforce

Video

Leadership

Performance

Sources: PitchBook, HRTECHFeed

HR TECH UNICORN TRACKER

Newly Minted Unicorns

HCM FINANCING ACTIVITY

Jun-23

May-23

May-23 Dropstat

May-23

May-23 Compli

May-23 Smace Technologies

May-23 Speak_

May-23 Stepful

Apr-23 Sinecure

Apr-23 CV Wallet

Apr-23 Eskalera

Apr-23 Sonet.io

Apr-23 Spayr

Apr-23 Bearn

Apr-23 Talentism

Apr-23 Loopin

Apr-23 Mediflash

Apr-23

Apr-23 Spotted Zebra

Apr-23 Elevate

Apr-23 Jobreel

Apr-23 Engin

Apr-23 inploi

Apr-23

Apr-23 Airspeed

Apr-23 Raenest

Apr-23 Teamsharq

n/m G-Force Capital and Noordelijke

Panoramic Ventures

Innovati

n/m

n/m Reach Capital

$10 Golden Section

n/m

super{set}

n/m The Hive and WestWave Capital

Blast.Club, Femmes BA

n/m Relentless Agency

Decathlon Capital Partners

n/m n/m

$17 n/m

Anthemis, Bowery, Fin

HCM FINANCING ACTIVITY

LATE-STAGE VENTURE CAPITAL

Jun-23 Settly

Jun-23 Datapeople

Jun-23 Zenarate

Jun-23 WorkBuzz

Jun-23 Humanly

Jun-23 Mentor Spaces

Jun-23 VanHack

Jun-23 Inclusology

Jun-23 Nuooly

Jun-23 Swing Education

Jun-23 Thincrs

Jun-23 Xtramile

May-23 Sana Labs

May-23 Emotion Tech

May-23 UnifyWork

May-23 Opus

May-23 Ceresa

May-23 Groopit

May-23 HR Datahub

May-23 Instawork

May-23 Edflex

May-23 Supermood

May-23 CultureAI

May-23 hackajob

May-23 Simpplr

May-23 Biteline

May-23 Skello

Apr-23

Apr-23 Levee

Apr-23

Sources: PitchBook, HRTECHFeed

Acquisition

Management

Acquisition

Management

$35 Great Point, New Market

Volition Capital

n/m YFM Equity Partners

$25 Drive Capital, Basecamp Fund

n/m Carter Williams

n/m Golden Secti

Management n/m n/m IFundWomen

Acquisition <$1 n/m Disruptive Labs

Acquisition

Management

$61 Apax Partners

Ferter

n/m Menlo Ventures

n/m Plaid and Femto Partners

$9 North Coast Ventures

Gutter Capital, Stage 2 Capital

Management $10 n/m WestRiver Group

Management

ACF Investors, Mercia, Midlands

n/m TCV

$10 Omega Healthcare

Management $9 n/m Conviction VC, Passion, Senovo

n/m Volition Capital

Sapphire Ventures

Acquisition n/m n/m Alemis Ventures

Siparex Group

Benesse Holdings

Foresight Group

GAA Investments, Singularity

Blackfinch Ventures

Crédit Mutuel Equity

PRIVATE EQUITY GROWTH / EXPANSION

Acquired by

Margaret McCormick VICE PRESIDENT

Nick Mignone SENIOR ASSOCIATE

Zuri Goodman ANALYST

The material in this report is for information purposes only and is not intended to be relied upon as financial, accounting, tax, legal or other professional advice. This report does not constitute and should not be construed as soliciting or offering any investment or other transaction, identifying securities for you to purchase or offer to purchase, or recommending the acquisition or disposition of any investment. Harbor View Advisors does not guarantee the accuracy or reliability of any data provided from third party resources. Although we endeavor to provide accurate information from third party sources, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future.