Report Predicts Continued Deal Activity in HCM Technology M&A

Urban Money

Private equity firm Hellman & Friedman’s $11 billion buyout of Ultimate Software is just the most dramatic indication of rising momentum in the mergers and acquisitions of HCM technology companies.

A report by UK-based advisory firm Hampleton Partners said the Ultimate transaction, the industry’s largest-ever deal, was one of 66 to take place during 2019’s first half, a number it called “a spike.”

PE firm Hellman & Friedman’s $11 billion buyout of Ultimate Software is just the most dramatic indication of M&A's rising momentum in the HCM technology space. #HR #HRTribe #HRTech Click To Tweet

Hampleton Partners Director Axel Brill called 2019 “a great year to sell a company in the HRtech space.” Transaction volumes, multiples and valuations hit their highest levels in years, he said. In large part, he attributed the trend to PE firms’ demand for quality assets and the availability of cheap debt.

Strategic M&A Afoot

The firm noted that a number of strategic acquisitions were among the deals made, including Salesforce’s purchase of ClickSoftware, which provides field service management software, for $1.4 billion. It said the most active acquirers in HR technology were Assure Software, which has absorbed 10 companies in the past 30 months, and Bullhorn, which made five acquisitions in the same period.

What’s driving all this buying? Among the trends Hampleton Partners identified:

  • Increasing activity among companies such as Pymetrics, HiredScore and HireVue, which apply new technologies to high volume recruitment and assessment efforts.
  • The rise of employee experience platforms. Employers are deploying platforms such as ServiceNow, Deloitte ConnectMe, PeopleDoc (a unit of Ultimate Software) and PeopleSpheres to provide onboarding, training, compensation and other services to employees.
  • Continued growth of people analytics as HR data is tapped for insights in the workforce as a whole and individual employees, all to drive more evidence-based decision-making.

Brill expects strategic acquisitions to continue as vendors seek to expand their product offerings while ensuring they’re ready for digital transformation. In particular, analytics, cloud platforms, payment processing, resource planning and AI recruitment technologies will be getting investors’ attention.

“We expect the sector’s record-breaking metrics to continue on their upward trajectory,” Brill said. “The sector is set to remain stable and strong over the long-term, as the need to improve business insights, resource allocation and employee engagement and productivity will remain imperative to future business success.”

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