The HR Tech landscape underwent profound changes in 2023, marked by strategic consolidations, private equity engagement, and a dynamic interplay of risks and opportunities. The commitment to innovation, tailored solutions, and strategic acquisitions showcased the sector's adaptability in an ever-shifting market.
by hrtech
2023 Overview:
In the ever-evolving landscape of HR Tech, 2023 proved to be a year of dynamic transformation, witnessing a substantial surge in mergers and acquisition activity totaling 224 deals. The year unfolded in two halves, with H1 2023 witnessing 126 deals (Q1: 63, Q2: 63) and a subsequent dip in H2 due to a slowdown in Q4 consolidations, concluding with 98 deals (Q3: 60, Q4: 38).
Mirroring the trends from the previous years, Talent Acquisition continued to lead with 87 deals, showing a 14.47% Y-O-Y increase. Total Rewards emerged as a key category in the 2023 consolidation, showing an upward trend with a 220% Y-O-Y increase (as compared to corresponding period in 2022) in deal volume. As companies aimed at providing comprehensive employee engagement and experience through benefits, the focus extended to drive employee satisfaction, productivity, and loyalty alongside fostering financial wellness.
Amidst the lingering effects of the pandemic, geopolitical tensions, and economic uncertainties such as rising interest rates, recession fears, and inflation, the global economy encountered challenges. Organizations struggled to predict market trends and plan for the future, resulting in a slowdown of overall M&A activities across various sectors. Despite this challenging climate, the HR Tech sector exhibited resilience and demonstrated a notable upward trend.
To mitigate the risks associated with uncertain economic conditions, companies turned to mergers and acquisitions as a strategic response. Consolidation emerged as a means to achieve stability, optimize resources, and strengthen market positions amidst the unpredictable business environment.
Key Market Drivers for surge in HR Tech M&A & Consolidation Outlook:
1. Unlocking Opportunities Through Valuation Corrections:
Valuation corrections in recent times have unfolded as a strategic window for companies to acquire assets at more favorable prices. This not only addresses financial considerations but also allows organizations to achieve operational synergies. The integration of technologies, talent pools, and market presence showcased a comprehensive approach to navigating the challenges within the HR Tech landscape.
Funded HR Tech companies, recognizing the potential within this unique phase, strategically utilized their financial backing. This proactive approach allows them to capitalize on the opportunity, exploring acquisitions aligned with their growth objectives. The injection of funds plays a pivotal role, not only expanding their service offerings but also positioning them as key players in the ever-evolving HR Tech landscape.
As we move forward, cash-rich companies stand at a strategic advantage in the current market scenario. Their liquidity not only enables them to capitalize on low or corrected valuations but also positions them to secure valuable assets, strengthening their market positions through strategic acquisitions. The focus on seizing opportunities revolves around optimizing portfolio offerings, with these companies aiming to enhance service capabilities, expand market reach, and gain a competitive edge.
2. Surge in HR Tech acquisitions by PE Firms:
In shaping the digital evolution of the HR Tech sector, Private Equity (PE) firms have strategically supported companies, steering them towards offering more cloud-based services to meet the market demands. The driving force behind PE firms' investments in HR Tech is deeply rooted in the persistent challenges organizations face in talent acquisition and retention, coupled with the imperative to upskill workforces amidst continuous technological changes.
The commitment of PE firms to advancing digital evolution extends beyond the adoption of SaaS. It underscores a paradigm shift in digital skills assessment, emphasizing the critical importance of enhancing workforce digital competency within the technology-driven work environment. Acting as catalysts for innovation, these firms leverage Gen AI and advanced technologies to address labor shortages.
This strategic focus aligns seamlessly with their recent acquisitions in companies offering integrated Human Capital Management (HCM) solutions. This integration extends beyond core HR functions, encompassing payroll, time & attendance management, and benefits administration.
PE firms have also shown significant interest in accelerating AI strategies and driving the adoption of advanced HR Tech solutions. Their influence reshapes the HR Tech landscape, not merely as financiers but as architects propelling the sector towards a future where technology transforms the very fabric of HR processes for organizations worldwide.
3. HR Tech's Integration for Optimized Healthcare Workforce Solutions
In 2023, a prominent trend emerged with the strategic amalgamation of HR Tech solutions for frontline workforce, notably within healthcare staffing and allied services. Companies discerned the potential for synergies between HR Tech and healthcare staffing services, prompting them to broaden their service offerings by incorporating healthcare solutions to cater to the unique demands of the sector.
This diversification not only addressed critical staffing shortages in the healthcare domain but also positioned HR Tech providers as comprehensive workforce management partners for healthcare organizations. Through the integration of healthcare workforce services, HR Tech companies aimed to assume a pivotal role in addressing workforce challenges specific to the healthcare sector.
4. Dynamic M&A Evolution:
Amidst a whirlwind of M&A activity, 2023 witnessed a fascinating trend wherein companies, recently acquired or recently merged, swiftly pivoted to become acquirers themselves. This dynamic behavior showcased a continuous cycle of transformation within the HR Tech sector. Notably, some companies found themselves in the intriguing position of being both acquirer and acquired within a short span.
This dual role-playing emphasized the sector's agility and adaptability, revealing a landscape where organizations seamlessly transitioned from one side of the M&A spectrum to the other, creating a dynamic narrative of evolution and consolidation.
5. Growing Demand for Hyper-Personalisation and Niche Offerings:
The trend towards hyper-personalisation signifies a strategic shift in the HR Tech landscape. Companies are recognising the importance of tailoring their offerings to meet specific and evolving needs, thereby enhancing customer satisfaction and gaining a competitive advantage.
From specialized job boards and personalized learning solutions to the growing demand for HR Tech solutions in the Healthcare sector, firms acquiring HR Tech providers with niche offerings is a deliberate strategy aimed at portfolio optimization.
6. Investor caution persists:
Despite the surge, investor caution persists as the world is still far from a stable, growing economy phase. Providers continue to tread carefully, making strategic moves to secure their positions amidst uncertainties.
To navigate the ongoing economic uncertainties, organizations are adopting adaptive strategies, involving a careful balance between risk aversion and seizing opportunities, ensuring a resilient approach to the ever-changing HR Tech landscape.
In line with these trends and market drivers in the HR Tech sector, we recorded some notable deals in the industry.
Notable Deals of 2023 across categories:
- HRMS:
BetterPlace (HRMS) having raised $40M in Dec '22, executed strategic acquisitions MyRobin (Blue-collared workforce sourcing) in Feb'23 and TROOPERS (Freelance Workforce Solution) in Apr '23.
Maguar Capital (Private Equity Firm) successfully acquired HRworks (HCM & Payroll Provider).
PwC (Consulting Firm) expanded its portfolio through the acquisition of People Force (HCM & Payroll Provider).
ADP (HCM & Payroll) strengthened its position through the acquisition of Sora (Workflow Automation) and Securax Tech Solutions (Workforce Management).
JER HR Group (HR Consulting Firm) pursued a comprehensive strategy and acquired Human Resources Plus (HR Consulting Firm) and merged with NexaLearning (HRMS).
- Talent Acquisition:
Spark Hire (Video Interviewing Platform) raised undisclosed round of funding in May '22, merged with Comeet (Applicant Tracking System) in Jun ‘23 and acquired Chally (Talent Assessment Platform) in Sep’23
Kohlberg & Company (Private Equity Firm) acquired Engage PEO (PEO/EOR) which later merged with Zamp HR (PEO/EOR)
Aya Healthcare (Healthcare Staffing) acquired 3 complimentary deals : Flexwise Health (Healthcare Staffing), Polaris AI (Healthcare Staffing), and Winnow AI (Healthcare Staffing)
Renowned video interviewing platform HireVue acquired APAC based ModernHire (Talent Acquisition Platform) to expand its footprint.
Radancy (Talent Intelligence Platform) acquired Brazen (Career Fair Company) and Ascendify (Recruitment Marketing Platform)
- Talent Analytics:
Global leader in labor market analytics Lightcast acquired Gazelle (Business Intelligence Provider)
Leading cloud-based engagement and culture tool which helps in listening to employee feedback Perceptyx (Employee Listening) acquired Humu (Behavioral Technology) which had raised $60M in Jan’22
PerceptionPredict (Talent Intelligence Platform) acquired HireWho (Talent Acquisition Platform)
- Talent Development:
Go1 (Corporate Learning & Authoring) which raised $100M in Q2 '22 acquired Anders Pink (Content Curation) in Jan'23 and Blinkist (Microlearning Platform) in May '23.
ScaleUp Capital (Private Equity Firm) acquired PushFar (Employee Mentoring Software).
Home Care Pulse (Caregiver Training Platform) acquired Activated Insights (Employee Engagement Platform), Pinnacle Quality Insight (Employee Engagement Platform), Teaching Transitions (Volunteer Training), and Pre-Intent (Talent Acquisition Platform).
Mercer (HR Consulting Firm) acquired Leapgen (HRTech Advisory Platform) and The Talent Enterprise (Talent Assessment Platform).
Docebo (Learning Management System) acquired Edugo.AI (Learning Management System).
- Talent Engagement:
Reward Gateway (Employee Engagement & Benefits Platform) acquired Fond (Employee Engagement & Benefits Platform) and later got acquired by Edenred (Employee Engagement & Benefits Platform) which had earlier acquired GOintegro (Employee Engagement Platform).
Uniphore (Employee Listening) which was a megadeal in 2022 having raised $400M in Feb '22 acquired RedBox (Voice Capturing Platform) and Hexagone (Behavioural Technology) in Feb'23.
Likeminded (Mental Wellness) secured fundings of $6.5M and $1.6M in Aug '23 and Oct ‘23 respectively and acquired whylab (Peer Coaching for Mental Wellness) in Sep '23.
Silver Lake & CPP Investments (Private Equity Firm) acquired well known survey tool Qualtrics (Employee Experience Platform).
Virgin Pulse (Health & Wellness) merged with HealthComp (Employee Benefits Platform).
- Talent Operations:
Mitratech (Workflow Automation & HR Compliance) acquired Trakstar (Performance Management Platfom) and Circa (Diversity Recruiting).
Riverside Company (Private Equity Firm) acquired Gastromatic (Workforce Management Platform).
Humanforce (Workforce Management Platform) acquired Wagestream (Earned Wage Access) and intelliHR (HRMS).
Keensight Capital (Private Equity Firm) acquired aconso (HR Dematerialisation).
Septeo (Software Solutions Provider) acquired Listo Paye (Payroll Platform) and Primobox (HR Dematerialisation).
- Total Rewards:
Beqom (Compensation Management Solutions) secured a funding of $300M in Apr '22 and acquired Pay Analytics (Pay Equity Solution) in Dec’23.
Arthur J. Gallagher & Co. (Consulting Firm) acquired Buck (Employee Benefits Platform).
Minu (Employee Benefits Platform), raised $10M in Feb '23 and acquired Plerk (Employee Benefits Platform) in Feb '23 which had also raised $12M in Aug '22.
Salary.com (Compensation Management Solutions) acquired HCR Software (Compensation Planning Software).
Salary Finance (Employee Benefits Platform) merged with FinFit (Financial Wellness Platform).
Conclusion:
Reflecting on HR Tech's 2023 Evolution
The HR Tech landscape underwent profound changes in 2023, marked by strategic consolidations, private equity engagement, and a dynamic interplay of risks and opportunities. The commitment to innovation, tailored solutions, and strategic acquisitions showcased the sector's adaptability in an ever-shifting market.
Looking ahead to 2024, the trajectory of HR Tech M&A indicates sustained growth and innovation. Trends from 2023, including deeper AI integration, cross-industry collaborations, and a focus on employee-centric solutions, are expected to shape the industry. This positive yet cautious outlook aligns with the sector's narrative of resilience and adaptability.
While optimism prevails, investor caution persists due to ongoing economic uncertainties. Organizations are adopting adaptive strategies, carefully balancing risk aversion with seizing opportunities. The resilient approach ensures a strategic stance in the ever-changing HR Tech landscape, contributing to the sector's continued evolution in 2024.
For more details on all the deals access the 2023 HR Tech M&A report.
About the Author:
Founded in 2018, hrtech is a Singapore-based HRTech Analyst firm dedicated to facilitating Workplace and Workforce Transformations that drive impactful Business and HR outcomes. Our ultimate vision is to empower HR professionals to transform their organizations by seamlessly integrating technology and human-centric approaches.
From our very beginning, we have been committed to building a TECH-DRIVEN and DATA-CENTRIC HR ECOSYSTEM that empowers organizations to achieve successful Workplace and Talent Transformations, while enabling HR teams to evolve into Strategic Business Partners.
At hrtech, we recognize the paramount importance of adapting to the ever-changing demands of the modern workplace. Our unique value proposition lies in automating and digitizing HR processes to initiate a transformative mindset shift. By embracing our ecosystem, organizations can leverage the power of technology to streamline operations, enhance Business and HR productivity and efficiency, elevate employee experiences, and unlock their full potential.
Our comprehensive ecosystem serves as a catalyst for the digital transformation of HR functions, enabling you to optimize efficiency, foster innovation, and cultivate a thriving workforce amidst constant change. To facilitate this transformation and drive organizational success, we operate through our four distinct verticals of Academy, Advisory & Consulting, Marketplace Solutions and Talent OnDemand.
