January 9, 2024 – The mergers and acquisitions environment for HR technology companies in 2023 has been characterized by various trends and key developments. Here is a summary, stressing the current situation and forecasts:
M&A Activity in 2023 and Early 2024 Outlook: In the first half of 2023, the technology sector, including HR tech companies, experienced a slowdown in mergers and acquisitions (M&A) activity. This trend was a response to economic factors such as interest rate hikes by the Federal Reserve, leading companies to adopt more conservative M&A strategies, focusing on profitability and market consolidation rather than expansion. However, the latter half of 2023 saw a resurgence in M&A activity, though the overall value of these deals remained below past averages. This resurgence was partly due to companies seeking more incremental acquisitions and smaller deal sizes, a shift from transformative, high-value transactions. Looking forward to the first half of 2024, the M&A market is expected to remain subdued, but low valuations and financial challenges for startups could drive an increase in deal volume at lower prices.
Notable Acquisitions in 2023: One of the significant acquisitions in 2023 was Edenred’s purchase of UK-based Reward Gateway for £1.15 billion, and valuing Reward Gateway at 20x EV/EBITDA 2023e (see article for source: Edenred acquires Reward Gateway). This merger brought together Edenred’s global market leadership and Reward Gateway’s technology to offer end-to-end employee services and benefits. The combined entity expanded its reach into new regions and countries, providing multi-country employee benefits and engagement platforms. This acquisition is an example of how M&A in the HR tech sector is creating more comprehensive and innovative solutions for HR departments globally.
Emerging Trends in HR Tech Post-Acquisitions: Post-acquisition, many HR tech companies are focusing on integrating passive listening tools in their HR analytics. These tools aggregate data from HR software platforms to observe employee behavior and communication patterns, providing insights into productivity, feedback delivery, onboarding efficiency, and employee engagement. This trend underscores the growing importance of data-driven decision-making in HR technology.
Focus on Employee Experience and Personalization: The HR technology landscape is increasingly focusing on enhancing the employee experience and personalizing HR services. Companies are adapting to new work models (remote, hybrid, in-person) and seeking to provide seamless communication platforms that cater to individual preferences. This shift towards personalization and improved employee experiences is likely to continue in 2023 and beyond.
Outdated Practices and New Directions: The HR management landscape is evolving, with a significant shift away from traditional paper-pushing and compliance-focused roles to more strategic functions such as workforce planning and people analytics. This evolution is accompanied by the need for HR to step out of its traditional comfort zone and take on new challenges like transparency, diversity, equity, inclusion, and employee mental health.
Industry Outlook for 2024: The HR tech M&A environment in 2024 is expected to be influenced by economic factors, technological advancements, and evolving market needs. Companies will likely continue to seek strategic acquisitions that enhance their technological capabilities and expand their service offerings, particularly in areas like AI and data analytics. However, economic uncertainties and changing investor attitudes may influence the scale and nature of these transactions.
Overall, the HR technology M&A landscape is undergoing significant changes, with a focus on smaller, more strategic acquisitions, integration of advanced technologies, and a shift towards enhancing employee experiences and personalization. The environment in 2024 is expected to be dynamic, influenced by economic trends and evolving market demands.
2023 Significant HR Technology Industry Mergers and Acquisitions
Talent Acquisition & Recruitment
- Radancy & Brazen/Ascendify: Radancy, renowned for its Talent Cloud in recruiting, merged with Brazen, a platform for hiring events and communication, and Ascendify, known for its enterprise recruitment CRM.
- Lightcast & Gazelle: Formed from the union of Emsi and Burning Glass, Lightcast, a labor market data provider, acquired Gazelle, specializing in B2B intelligence.
- LiveHire & Arrived Workforce Connections: Award-winning LiveHire expanded its hiring platform by acquiring Arrived Workforce Connections, enhancing candidate reach and direct sourcing.
- Clovers & Talvista: Clovers acquired Talvista, combining two inclusive hiring solutions.
- Fama & Social Intelligence: Fama, notable for social media background checks, acquired Social Intelligence, strengthening its position in the HR Tech space.
- Spark Hire, Chally, & Comeet: Spark Hire, a video interviewing solution, took over Chally, an assessment provider, and merged with Comeet, an ATS solution, reflecting the trend towards combined video and assessment tools in recruitment.
- Veritone (Pandologic) & Broadbean: Veritone, known for its AI-driven Pandologic recruiting solution, acquired Broadbean, a legacy recruitment tech firm, potentially enhancing its AI capabilities.
- Appcast & Bayard Advertising: Appcast, a programmatic recruiting technology leader, acquired Bayard Advertising.
- Hirevue & Modern Hire: Hirevue expanded by acquiring Modern Hire, a prominent provider of video interview and hiring assessment solutions.
- Fountain & Clevy: Fountain, specializing in high-volume hiring and onboarding, acquired Clevy.
Talent Management & Employee Experience
- Engagedly & theEMPLOYEEapp: Engagedly, an HR Tech Award recipient, acquired theEMPLOYEEapp to enhance frontline worker communication.
- Neobrain & Flashbrand: Neobrain, a global skills insights provider, acquired Flashbrand, establishing its presence in North America.
- Mitratech, Trakstar, & Circa: Mitratech, known for employer compliance solutions, acquired Trakstar (talent acquisition and development) and Circa (DEI and OFCCP compliance).
- Simpplr & Socrates.ai: Simpplr, an internal communication hub, acquired Socrates.ai, an advanced chatbot solution for employee experience.
- Edenred & Reward Gateway: Edenred acquired Reward Gateway, a provider of rewards and recognition services.
- Perceptyx & Humu: Perceptyx, an HR Tech company, took over Humu, known for its “intelligent nudges” technology.
- Peoplelogic & Plai: Peoplelogic, an HR Tech firm, acquired Plai to boost performance management and employee experience.
- Quantum Workplace & Talent Keepers: Quantum Workplace, a leading employee success platform and engagement partner for the Best Places to Work programs, acquired Talent Keepers a provider of employee engagement and retention solutions.
Core HR, HCM, & Compensation
- Salary.com & CompXL: Salary.com, an HR Tech winner, acquired CompXL, enhancing its compensation management capabilities.
- Paycor & Verb: Paycor, known for HR and payroll solutions, acquired Verb, enhancing its microlearning support.
- ADP & Sora: ADP, a payroll and HR solutions leader, acquired Sora, a low-code workflow automation tool.
- Deltek & Replicon: Deltek, a leader in payroll solutions for government contractors, merged with Replicon, a workforce management system.
- When I Work & Lean Financial: When I Work, known for its workforce management solution, acquired Lean Financial to integrate earned wage access.
- UKG & Immedis: UKG acquired Immedis, a global payroll provider, facilitating international payroll processing.
- Salesforce & Spiff: Salesforce announced the acquisition of Spiff, a platform that automates commission management for sales teams.
Learning & Talent Development
- Docebo, Edugo.ai, Go1, Blinkist, Anders Pink, & LMS365/Weekly10: Docebo, a global LMS market leader, acquired Edugo.ai for AI enhancements. Additionally, Go1 took over Blinkist and Anders Pink, and LMS365 acquired Weekly10, a performance management solution.
- Radancy & Brazen/Ascendify: Radancy acquired Brazen, expanding its Talent Acquisition Cloud with advanced hiring event technology. Brazen offers solutions for managing both virtual and in-person recruiting events, complementing Radancy’s platform focused on helping enterprises find talent. The acquisition aims to deliver a holistic candidate experience across all channels.
- Lightcast & Gazelle: Lightcast, a leader in labor market analytics, acquired Gazelle, a Montreal-based business intelligence provider. Gazelle ranks companies based on their likelihood to expand, using a database of over 9.5 million companies. This acquisition enables Lightcast to integrate Gazelle’s insights, enhancing its labor market analysis capabilities.
- LiveHire & Arrived Workforce Connections: LiveHire, a talent acquisition and direct sourcing platform, acquired Arrived Workforce Connections Inc. This acquisition aims to grow LiveHire’s share of the contingent direct sourcing market and strengthen its position as a total workforce management platform. Jennifer Byrne, CEO of Arrived, joined LiveHire as the global Chief Product and Technology Officer.
- Clovers & TalVista: Clovers, an HR technology company providing intelligent interview software, entered into a definitive agreement to acquire TalVista, a diversity and inclusion platform. This acquisition aims to reduce bias in the hiring process and enhance DEI&B in hiring. TalVista focuses on driving data-driven candidate attraction and screening and promotes bias-free hiring through inclusive language optimization and blind resume reviews
Solganick & Co. expects the HR Technology sector to gain traction as large strategic buyers seek out complementary and new product offerings, including adding data analytics and AI to their product stacks. Thus, M&A volume will likely increase in 2024.
For more information on the HR Technology industry sector or to inquire about an M&A opportunity, please contact Alexei Sorokin, Managing Director at [email protected].
