Human Capital Management
Q3 HCM SUMMARY & OUTLOOK
During Q3 of 2022, the Human Capital Management sector experienced continued softening in transaction activity, following the robust 2021 period There were 67 VC investments this quarter totaling $1 5B compared to the 96 raises last quarter totaling $4 3B Venture and growth investors are scaling back their investment pace due to inflation, rising interest rates and market volatility. While VC investment activity sharply declined, M&A volumes remained strong by historical standards. The Core HR space benefited from these market shifts, as investors and acquirers adjusted their focus to less cyclical areas of HCM.
WHILE VC INVESTMENT
Staffing: Healthcare and IT Focus
While transaction activity in the Staffing sector decreased quarter over quarter, Healthcare and IT staffing continue to be primary drivers of transaction activity as both segments are beneficiaries of chronic talent shortages Nurse staffing companies continue to be popular acquisition targets For example, travel nurse specialist Prime Time Healthcare was acquired by One Equity Partners and Barton & Associates was acquired by H I G Capital Tech workers continue to be high in demand as the IT staffing sector made up over 23% of the staffing transactions. One example is global IT staffing firm DISYS acquiring the assets of professional services and IT recruiting firm MAKE Corporation expanding its offerings in the IT staffing and professional services space.
Core HR: Payroll and Hybrid Work
The Core HR sector experienced record M&A activity as a percent of total HCM transactions as buyers seek to invest in mission critical solutions. The sector was responsible for 24% of all M&A deals in the HCM space this quarter, primarily driven by providers of payroll and hybrid workforce management solutions. HRIS platform Hibob raised $150M in Series D funding, valuing the company at $2 3B Payroll companies also received the largest share of VC investment this quarter with nearly $300M in capital raised with investments focused on international payroll and on-demand pay Hybrid workforce management software is a continuing trend that also accounted for the increased activity within Core HR. For instance, desk booking and team scheduling software OfficeTogether was acquired by workplace experience and space management provider Envoy following Envoy’s $111M Series C raise in January 2022.
Talent Acquisition: International Employee Screening and Healthcare Sourcing
The global workforce is more dispersed than ever, leading to employers expanding their international screening processes and investment in the space has followed. For example, international background check provider Hire Image was acquired by background screening company Orange Tree following its acquisition by Tonka Bay Equity Partners in February 2021 In addition, UK-based international screening company Vero Screening was acquired by pre-employment screening provider
Accurate Background. Also driving talent acquisition investment, healthcare sourcing capabilities have been in high demand reflecting the shortage in nursing and healthcare talent across the globe. For example, platform for sourcing healthcare professionals Matchwell was acquired by one of the largest providers of workforce solutions in the healthcare industry Medical Solutions.
Talent Management: Training, Compliance and Language Learning
Employers are increasingly turning to digital solutions for learning and compliance and investor interest has followed. One example is IT and cybersecurity training platform Cybrary’s $25M series C raise led by BuildGroup. Another deal in the training space was healthcare compliance company Panacea Healthcare Solutions’ acquisition of medical training platform First Healthcare Compliance Language learning companies also received attention from investors For example, digital language training platform Preply raised a $50M Series C at a $360M pre-money valuation. In addition, Harbor View Advisors represented language assessment software Emmersion in its sale to online education platform IXL Learning.
HCM PUBLIC MARKETS
TTM Median Revenue Multiples
TTM Median EBITDA Multiples
6/30/2022 9/30/2022
Source: PitchBook, Data as of Sep 2022 TTM
6/30/2022 9/30/2022
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
Excludes companies not traded prior to 9/1/2021
HCM PUBLIC TRADING STATISTICS
HVA’S Q3 2022 HCM QUARTERLY REPORT
CORE
TALENT MANAGEMENT
TALENT ACQUISITION
HVA’S Q3 2022 HCM QUARTERLY REPORT RECENT
Undisclosed AUG 2022
Undisclosed JUL 2022
$3.7B AUG 2022
Undisclosed AUG 2022 Undisclosed SEP 2022
Undisclosed JUL 2022 Undisclosed AUG 2022
$2.9B CAD SEP 2022
Undisclosed AUG 2022 Undisclosed SEP 2022
HR M&A TRANSACTIONS
HR M&A TRANSACTIONS
TALENT MANAGEMENT (CONT.)
TALENT ACQUISITION
STAFFING M&A TRANSACTIONS
STAFFING
HCM FINANCING SUMMARY
SEP 2022
QUARTERLY
FINANCING
ACTIVITY
HR TECH UNICORN TRACKER
HVA’S Q3 2022 HCM QUARTERLY REPORT
Q3 2022 NEWLY MINTED UNICORN
HR TECH UNICORNS
HCM FINANCING ACTIVITY
PRIVATE EQUITY GROWTH / EXPANSION
HCM FINANCING ACTIVITY
HVA’S Q3 2022 HCM QUARTERLY REPORT
Workforce Management Payroll
Learning HRIS Hiring Tools
Performance Management Sourcing
Compensation and Benefits
Employee Engagement
Leadership Development Wellness
Talent Analytics
Assessments
Onboarding
Pre-Employment Screening
Rewards and Recognition
Video Interviewing
SUB-SECTOR SPOTLIGHT: ASSESSMENTS
HVA’S Q3 2022 HCM QUARTERLY REPORT
In 2021, $660M was invested in the assessment space, including three companies that each raised over $100M, along with 12 M&A transactions In 2022, we have seen continued investment, albeit at a lower volume and deal size, but still attracting $213M in funding and four M&A deals The space has garnered employer and investor interest as companies look to hire qualified talent more efficiently and develop current talent more effectively. This dual need for pre-hire and post-hire assessments, has generated demand for comprehensive suites solutions, sparking consolidation and convergence across a diverse set of use cases and assessment types.
Perhaps the most active acquirer in the assessment space, PSI Services backed by Waud Capital has made over thirty acquisitions, rolling up assessment and training companies spanning higher education, certifications, and corporate assessments. Harver (formerly OutMatch), has acquired solutions across assessments, video interviewing, and talent analytics, most recently acquiring behavioral assessment platform Pymetrics to enhance talent decision capabilities across both hiring and development In addition, provider of video interviewing and assessments HireVue has acquired capabilities in gamified cognitive assessments and skills assessments with its acquisition of MindX and Candidate Metrics, respectively
As new assessment solutions emerge and incumbents continue to consolidate, providers are tasked with striking the appropriate balance of a quick, easy-to-use assessment and one that is research backed and validated. For example, in pre-hire assessments, the candidate experience is of high importance to prevent candidate dropout during screening, but a data validated assessment is necessary to make appropriate hiring decisions. There have been several investments in innovative assessment companies that aim to combat candidate dropout and support engagement Notably, six-minute behavioral assessment Predictive Index received a $30M investment from JM Family Enterprises, following General Catalyst’s $50M investment in 2019 In addition, mobile-friendly cognitive, technical, and language assessment platform TestGorilla raised a $70M Series A round led by Atomico.
Employer’s growing commitment to learning and upskilling has sparked investment in skills focused assessments for development and pre-hire purposes. Assessments are instrumental in identifying candidate abilities during the recruitment process and skills gaps in the current workforce Some companies are making strides towards connecting skills gaps with learning initiatives and these solutions are gaining interest from buyers and investors Here at Harbor View Advisors, we were proud to represent Emmersion, provider of language assessment used for pre-hire, placement, and ongoing development of language learners, in its sale to online education platform IXL Learning. Another example of this trend is NeoBrain, which Harbor View Advisors
collects employee data to identify skills, assess current capabilities, and map upskilling and reskilling pathways for individuals. The company raised a $22M Series A led by Breega in March of 2022 and six months later acquired skills mapping and mobility platform WiserSkills to expand strategic workforce planning capabilities. Also, HackerRank, which provides technical assessments and a learning platform for software developers, raised a $60M Series D round led by Susquehanna Growth Equity at a $275M valuation
Zuri Goodman
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.