HRTech Market Consolidates Aggressively With Record-Breaking M&A Deals Tracked in H1 2022

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

• Consolidation of the HRTech market continues with more investments flowing into young startups. 47% of executives say pursuing corporate M&As, joint ventures and alliances is their top gowth driver in 2022 as per the PwC C-suite Executives Pulse Survey of 2022. This is justified considering the increasing investments in the HRTech space with over US$9B already poured in 2022. Following this, big capital-rich HRTech firms are on the hunt to acquire small but niche HRTech firms to grow quickly. Besides, the increasing competition and the severe challenges presented by the pandemic to these small firms, have all accelerated their union with bigger market-leading firms
  
  
• In the first half of 2022, the HRTech M&A space clocked close to 80 deals and witnessed a 97.6% Y-o-Y growth compared to H1 2021(41 deals). Here is a  segment-wise comparative analysis of the deals in H1 2022 against the same period in 2021 - 
  
  
  

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. 

• H1 2022 saw several M&A happening with the intent of expanding to a newer and wider geographical market. For instance, UKG acquired Interboro Systems Corporation (having 50+ years of experience in the Caribbean market) to provide direct sales, services, and customer support for the Caribbean market. Further, Employment Hero’s acquisition of KeyPay allowed it to expand its access to over 12,000 SMEs in the UK, collectively managing over 120,000 employees using its platform, and a team of over 500 FTEs globally, with more than 35 in the UK.

Category-wise  Notable Deals

• HRMS

• Personio, one of the fastest-growing HRMS, acquired Back, an employee experience solution that automates key people processes to boost efficiency. This acquisition will support Personio’s strategic decision to advance and expand the People Workflow Automation category, which will enable HR teams in SMEs to work efficiently across departments and tools.
  
  
• UKG, a US-based leading global HRMS provider, acquired three organisations - Interboro Systems, Spotcues, and Ascentis Corporation - within a span of 6 months. This is owed to UKG’s interest in expanding its portfolio and strengthening 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 and will help UKG's customers to build more adaptive, flexible, and resilient workforces.
  
  
• Visma, a Norway-based leader in HRMS, acquired 4 HRTech firms namely Appical, Mandu, Woffu, and Teamleader. Appical’s acquisition will help it emerge as a European market leader in onboarding technology. The acquisition of Mandü, an employee engagement & performance management platform, will allow Visma to expand its HR product footprint to talent engagement and across several countries in Latin America, while offering customers technology that helps them create added value. Besides, this Woffu and Teamleader will help it expand its workforce management solution.
  
  

• Talent Acquisition 

• Remote-work startup Deel acquired Australian-based payroll company PayGroup for $119 million. Deel also acquired Roots, a 100% remote US-based company. Deel had raised a total of US$581 M in 2021 in its Series C and D funding round,  and US$50 M in May 2022 in the Venture round.
• Other EOR’s like Papaya Global and Australia based Employment Hero also continued the consolidation journey by acquiring Azimo and KeyPay respectively. We expect more focused M&A activity happening in the EOR subcategory considering the quantum of investments pouring into the Global employment platforms that summed close to US$1.5B in H1 2022 itself.
• Besides the EOR players, Background check platform Checkr raised US$285M in 2021 and acquired ModoHR & GoodHire in 2022 with an intent to accelerate growth & deliver better candidate experience.
  
  

• Talent Analytics

• Visier, the globally recognized leader in people analytics, acquired Yva.ai, a leading collaboration analytics vendor that shines light on employee well-being, satisfaction and productivity using AI and an innovative combination of deep collaboration analytics and peer polling for a rich understanding of employees, teams, and their work environments. Incidentally, Visier had raised US$125 M in July 2021 in its Series E funding led by Goldman Sachs Asset Management (Goldman Sachs) at a valuation exceeding $1B USD.
  
  

• Talent Development
  
  •  CornerstoneOnDemand acquired EdCast & SumTotal
    Digital learning platform provider Skillsoft agreed to sell its SumTotal business to Cornerstone OnDemand for approximately $200 million in cash. Cornerstone OnDemand also acquired EdCast, the learning experience platform software provider. The acquisitions come after Cornerstone joined Clearlake Capital’s portfolio last year after going private post an evaluation of approximately $5.2 billion.
    
    
  • 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 with the use of Gamification, Virtual Reality, Video platforms & authoring tools.
    
    
  • Go1 acquired Corpacademy to deepen its roots in Europe  and extend the e-learning content library in the region to support the growing demand for quality content. The acquisition comes after Go1 raised US$100M  in June 2022  after raising US$200M in 2021. 
    
    
  • Leading Corporate Learning and Authoring platform Degreed acquired Learn In to supplement its category-defining Degreed LXP (Learning Experience Platform), including a prepaid learning stipend card, a skills marketplace & custom program builder, a tuition benefits manager, and dedicated coaching.

• Talent Engagement

• Gtmhub, provider of the OKR platform for the world’s biggest companies, raised US$150 M in 2021 and acquired Koan, Cliff.ai in 2022. The acquisition of Koan comes at a time of immense growth and change within the category. Where the industry appears to focus on competing with itself or shifting the focus outside of OKRs, Gtmhub is doubling down on the optimization and innovation of its product at scale with the tactful acquisition.
  
  
• Perceptyx bought three companies in less than a year. In July ’21, the company announced it had acquired Waggl and CultureIQ. In February ’22 Perceptyx bought Cultivate, a leadership development platform. Cultivate's digital coaching platform uses AI to gain insights into behavior, sentiments, and tone and to provide recommendations to company executives.
  
  
• However, the leading focus in the Talent Engagement segment has been into the Health & Wellness domain primarily. Calm acquired Ripple Health Group to  build Calm Health, a suite of services designed to support mental health across the care spectrum that will replace Calm’s current employer offering, Calm for Business. Other deals were by the two unicorns in the HRTech Health & Wellness space Headspace Health (acquired Sayana) & Lyra (acquired ICAS) clearly indicating the  increasing importance of employee wellbeing as a priority for organisations.
   

• Talent Planning

• ServiceNow acquired HitchWorks, a talent Intelligence platform, which will add a new layer of AI‑powered skills insights to the ServiceNow Platform to help organisations address talent gaps by tying employee learning and development to workforce planning.

For more details on all the deals access the 2022 HRTech M&A report.