Jul 04 2022
“HRTech space continues to be resilient and a hotbed of activity with over 80 deals tracked in the M&A space in the first half of 2022 representing a growth of 92.6% Y-O-Y from 2021.”
Even after two years since the deadly pandemic hit the world, the spotlight on the HR function continues to grow by leaps and bounds. Digital transformation has become a crucial necessity for organisations to ace the challenges in hiring, engaging, training, upskilling and managing their workforce. All this has collectively accelerated the M&A trend in the HRTech sector.
While the war, inflation and bearish stock market have been a dampener following a bullish recovery phase post-pandemic, the years 2021 and H1 2022 have been the best for HRTech start-ups. Over US$14B was pumped across 330 deals in 2021 and US$9B has been pumped already in around 250 deals in the first half of 2022.
Despite various challenges and a volatile market, there are some key drivers are boosting the growth of HRTech space -
- Increasingly tight labour market that places a premium on talent acquisition
- Widening skills gap and generational shift that demands a new approach to today’s workplace
- Increasing importance of employee wellbeing and enhanced employee experience
HRTech space continues to be resilient and a hotbed of activity with over 80 deals tracked in the M&A space in the first half of 2022 representing a growth of 92.6% Y-O-Y from 2021.
Pursuing mergers and acquisitions (M&A) is an increasingly important strategy that can help HR Technology companies obtain skilled and tech-savvy talent and maintain a competitive advantage over others.
As a part of the HRTech market focus and extensive research, the hrtech.sg team has put together a M&A report, 2022. Below are some of the notable insights from the report.
Key Market Trends
Increasingly tight labour market that places a premium on talent acquisition
Talent Acquisition maintained its top position in the league with 44% of the total deals in 2022 coming from this segment alone. Also, the segment witnessed a 157% increase in the number of deals in Talent Acquisition in H1 2022 compared to H1 2021. This is in the wake of the surging remote working trend, which has augmented the need for EOR platforms that can help hire global remote talent easily.
Remote or hybrid work culture had been highlighted as a key HRTech adoption driver in our 2022 Market Outlook Report launched earlier this year. Further, the report also detailed out on how “Skills is the new currency” and one of the Top 8 HRTech Market Trends for 2022 & beyond.
Focus on Skilling to narrow the skills gap and provide a seamless learning experience
Talent Development led the growth journey in the M&A space with the steepest increase in segment share contribution, which grew to 18.5% (15 out of 81 deals) in 2022 from 0% in 2021. We also saw US$600 M+ investments in the Talent Development segment with prominent ones being: Go1 (US$100 M), Guild (US$175 M), eLearning Brothers (US$54 M), and Torch (US$ 40 M). This huge growth in the segment is a clear indication that businesses have understood the importance of skills & the need for continuous upskilling to navigate through the times of Great Employee Resignation.
Increasing importance of employee wellbeing and enhanced employee experience
Talent Engagement continued the streak with 13.6% of the total consolidation happening in this segment itself. Health & Wellness emerged as the leading subcategory with 30% acquisitions in this segment with a focus on Mental Wellness applications for employees. players like Calm (acquired Ripple Health Group), Headspace Health (acquired Sayana), Lyra (acquired ICAS). This was followed by the talent experience category, where Phenom (acquired Tandemploy) amongst other notable deals, which is increasingly gaining importance due to the changing employee expectations of a “consumer-grade experience”.
Although the Talent Operations segment remained dormant as against the investments in the segment which have been steadily growing (HRTech Investments and Funding H1 2022), all other segments observed an increase in consolidation from 2021. However, Talent Operations is known to outshine in terms of the total value of funding as compared to just the number of deals. Talent Operations has the second-highest average value of the deal size of US$45M after HRMS which was US$57.3M. Thus, we expect consolidation in Talent Operations to pick up pace in the latter half of the year with some big deals emerging.
Category-wise Notable Deals
For more details on all the deals access the 2022 HRTech M&A report.
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 HRTech evangelist, a member of IHRP HRTech 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.
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