2022 has been one of the biggest years for HR Tech consolidation. The year witnessed a total of 161 M&A deals, far surpassing the 2021 figure (103 deals) with a Y-O-Y growth of 56%.
by Swechha Mohapatra, Head Consulting & Delivery, hrtech
While the world economy barely came out of the pandemic, it was crushed by the ongoing war, surging inflation, rising interest rates and the looming recession fears. However, the need to leverage technology to improvise the people function & deliver enhanced employee experience still remains intact. Hence, the HR Tech function continued to garner attention and attract investments while accelerating the Mergers and Acquisitions trend in the sector.
In 2022 Talent acquisition category retained its top position while Talent Development climbed to third place as the demand for unified learning platforms increased significantly as organizations continue to upskill and reskill their employees to navigate the Great Resignation.
The post pandemic recovery has been one of the most crucial growth phases for the HR Tech sector. On the HR Tech investment front, around US$ 15B was pumped across 330+ funding deals in 2021 while 2022 received funding worth US$ 12.4B across 440+ deals.
47% of executives say pursuing corporate M&As, joint ventures and alliances was their top growth driver in 2022 as per the PwC C-suite Executives Pulse Survey of 2022. This is justified as consolidation of the HR Tech market continues with more investments flowing into young startups.
To expand their product portfolio and strengthen their market presence, capital-rich HR Tech organizations are on the hunt to acquire niche HR Tech providers. Moreover, increasing competition combined with severe funding winter makes the survival of these small firms difficult. These factors collectively accelerated their union with bigger market-leading firms.
Despite various challenges accompanied by a series of black swan events, there are some key drivers that are boosting the growth of HR Tech space -
- Scarce availability of skilled and qualitative talent places a premium on talent acquisition.
- Widening skills gap and generational shift demands a new approach towards talent development function.
- Changing workforce dynamics as workplace flexibility, employee wellbeing and enhanced employee experience takes the center stage.
Scarce availability of skilled and qualitative talent places a premium on talent acquisition
Talent Acquisition(TA) retained its top position with 48% of the total M&A deals and a 113% Y-O-Y increase in the number of deals in 2022. The surge in the TA space comes on the back of rising hybrid and remote working trends and the growing importance of Employer of Record firms in hiring global talent easily. Background screening and sourcing for workforce through niche job boards gained momentum as providers acquired new capabilities to expand in this segment to cater to growing demands.
Widening skills gap and generational shift that demands a new approach towards talent development function
Talent Development was a clear leader in the M&A space with a 111% Y-O-Y increase (19 deals in 2022 vs 09 deals in 2021). The remarkable growth in this segment is an indication that organizations have realized the importance of continuously upskilling and reskilling the workforce to tackle evolving skill demands and retain talent. US$1.6B were invested in the Talent Development segment, with prominent investments being: Multiverse (US$ 220M), upGrad (US$ 210M), CoachHub (US$ 200M), Guild (US$ 175M), Go1 (US$ 100M) & eLearning Brothers (US$ 54 M).
Changing workforce dynamics as workplace flexibility, employee wellbeing and enhanced employee experience takes the center stage
Employees now demand flexibility in where, when, and how they work. According to a Linkedin Survey, “Employees having complete work flexibility in terms of time and location are 2.6x more likely to be happy at work and 2.1x more likely to recommend others to work for their employer.”
Talent Engagement continued to be a key focus area (~11% of total M&A deals in 2022) for HR Tech solution providers. Health & Wellness emerged as the leading subcategory with an increased focus on Employee Mental Wellness applications. Employee Experience platforms are gaining popularity due to the changing employee expectations of a ‘consumer-grade experience’. This reflects in both M&A as well as investments going into the solutions under this sub category.
As a part of the HR Tech market-focused and extensive research, the hrtech team has put together a 2022 M&A report. Below are some of the notable deals and insights from the report.
- German HR Tech (to-be) decacorn Personio grabbed US$200M extension to its Series E round and acquired Back (employee experience) to advance and expand its People Workflow Automation category.
- US-based UKG acquired four organizations - Interboro Systems, Spotcues, Ascentis & Quorbit to expand its portfolio and strengthen its existing services. The acquisition of Interboro and Ascentis in the Talent Acquisition segment will help it build its workforce management platform. Whereas, the acquisition of employee communication platform SpotCues will help extend UKG's Life-work Technology approach. With Quorbit, UKG will be able to achieve operational excellence by bringing together strategic planning and employee development.
- Visma, a Norway-based HRMS leader, acquired 5 HR Tech firms, namely Appical (onboarding), Mandu (employee engagement and performance management), Woffu (workforce management), Teamleader (workforce management) & Beeple (planning and communication for shift workers).
- PeopleStrong, a leading HRMS player in APAC acquired Payreview to expand its capabilities. This acquisition will enable PeopleStrong to bring efficiency & transparency to its traditional compensation management and drive data-backed talent strategies.
- HiBob raised its Series D funding worth US$ 150 M in August 2022 and acquired Bugle to leverage the training platform for broadening its HR service offerings.
- Providers in the Employer of Record (EOR) subcategory were in the news with Israeli startup Deel, which touched a valuation of US$12 B in 2022 just a year after becoming a unicorn in 2021, acquired PayGroup for US$ 119 M. Deel raised over US$ 630 M over the last 2 years through Series C, D and Venture Round of funding (US$ 581M in 2021 and US$ 50M in 2022). Another EOR and (AOR) services platform People 2.0 aggressively expanded its geographical presence with 4 deals in 2022 including Husys (India) & Back of The House (Middle East, North Africa) apart from The Brookson Group & Ayers to provide its clients with contingent workforce compliance & solutions services. Other EORs like Papaya Global (Azimo) and Australia based Employment Hero (KeyPay) made acquisitions to expand their service offerings and geographical presence.
- Background checks and screening providers have been on the roll in 2022 for consolidations. Checkr expanded its presence and customer base by acquiring its competitors GoodHire and ModoHR. Certn made horizontal acquisitions by acquiring competitors Credence & InterCheck to expand its geographical footprint.
- Handshake, a Talent Acquisition Platform, in a bid to expand its offerings acquired Talentspace (Recruitment Marketing Automation Platform) after it raised US$ 200M in its Series F round. Beamery (all-in-one talent management) acquired Flux (internal mobility platform) and went on to become a unicorn in Dec 2022 after its US$ 50M Series D round.
- Harver acquired Pymetrics, one of the key players in the employee assessment segment, to bring in cutting-edge behavioral and data science technology of the latter.
- India based BetterPlace acquired OkayGo (Job board for gig workers) to scale up its offerings and avail access to gig workforce for its clientele.
- Popular Recruitment Platform Job.com acquired QCI Healthcare and PrincetonOne to modernize its staffing process and bring in a diverse clientele pool to its platform. Another recruitment platform, ICIMS acquired Skill Survey (Talent intelligence Platform) and Candidate ID (Recruitment Marketing Automation) to expand its business offerings.
- Leading People Analytics Unicorn, Visier, continued to deepen its people analytics platform and make it more comprehensive by acquiring Yva.ai (employee well-being, satisfaction, and productivity analytics) and Boostrs (skills intelligence). Incidentally, Visier had raised US$ 125 M in July 2021 in its Series E funding led by Goldman Sachs Asset Management (Goldman Sachs).
- In one of the biggest deals, Cornerstone OnDemand acquired SumTotal (Digital learning) for US$ 200 M and EdCast (Learning experience platform software). The acquisitions come after Cornerstone joined Clearlake Capital’s portfolio last year after going private post an evaluation of approximately US$ 5.2 B.
- eLearning Brothers, a global leader in the Training and eLearning industry acquired Rehearsal, CoreAxis and Origin Learning with an intent to create better learning experiences driven by Gamification, Virtual Reality, Video platforms & authoring tools. eLearning Brothers had raised a US$ 54M private equity fund led by RLG Capital, Trinity Investors in May 2022.
- HR Tech unicorn Go1 acquired Coorpacademy to deepen its roots in Europe and extend the eLearning content library. The acquisition comes after it raised US$ 100M in June 2022 & US$ 200M in 2021.
- Leading Corporate Learning and Authoring platform Degreed acquired Learn In.
- upGrad acquired Centum Learning to deliver impact-based training to corporates and educational institutions. This acquisition will complement upGrad's upskilling platform and prove to be a stepping stone in expanding its B2B learning and development market.
- LinkedIn acquired EduBrite as it aims to capitalize on its rigorous certification assessment engine. This acquisition will enable LinkedIn to test and verify the skills and further deliver a skills-first approach to hiring and learning.
- Leading Employee listening and analytics platform, Perceptyx bought three companies in less than a year - Cultivate (Leadership development and Digital coaching, 2022), Waggl (Jul 2021), and CultureIQ (Jul 2021).
- Health & Wellness subcategory in the Talent Engagement space saw a lot of consolidation where unicorns Headspace Health (acquired Sayana & Shine), Lyra (acquired ICAS), and Calm (acquired Ripple Health Group) closed deals to expand their existing service offerings. These acquisitions clearly indicate the increasing importance of employee wellbeing and mental health as a priority for organizations.
- Employee Experience has been another trending category under the Employee Engagement domain. Phenom acquired Tandemploy to enhance its AI-powered Talent Experience Management (TXM) platform capabilities and expand its presence in the European market. LumApps, another leading player in the employee experience segment acquired HeyAxel (Employee Onboarding Solution) & Vizir (AI Chatbot Builder) to humanify employee experiences.
- Payroll automation provider WagePoint acquired KinHR (onboarding) and Timesheet Mobile (time and attendance).
- Workflow Automation & HR Compliance platform Mitratech, acquired Assure Hire (automated background screening) & TalentReef (high volume applicant tracking for hourly workers).
- Singapore-based Workmate, an on-demand frontline staffing platform was acquired by Japanese-based HR conglomerate, Persol Asia Pacific for an eight-figure US dollar sum.
- ServiceNow acquired HitchWorks, a talent Intelligence platform, to add a new layer of AI‑powered skills insights to its platform and help organizations address talent gaps by tying employee learning and development with workforce planning.
- In conjunction with its Series C fundraise of US$ 100 M, Pave acquired the Advanced-HR product suite from Morgan Stanley. This solidifies Pave’s position as the world's largest compensation database for private companies.
The HR Technology market continues to be a hotbed of activity, as the spotlight on the HR function continues to grow by leaps and bounds. This is evident through the record number of Mergers and Acquisitions in 2022.
Digital transformation has become a crucial necessity for organizations to ace the challenges in hiring, engaging, training, upskilling and managing their workforce. This has collectively accelerated the M&A trend in the HR Tech sector.
As 2022 has been a subdued year after a bumper 2021, the coming months might see some uncertainty as HR Tech providers will be keen on spending cautiously. However, we still foresee larger providers to bank on the eminent opportunity to expand their services and offerings through ‘acquihires’, leading to continued action in the space.
For more details on all the deals access the 2022 HR Tech M&A report.
About the Author:
Swechha Mohapatra (IHRP-CP, Associate CIPD) is Head of Consulting & Delivery at hrtech.sg and has more than 9 years of global experience in various Talent functions. She is a passionate HR Tech evangelist, a member of IHRP HR Tech CoP Taskforce, and an avid learner who is certified Six Sigma-Green Belt with a background of MBA (Specialization in HR and IT) and Master’s in Labor Laws and Labor Welfare.