Year: 2019

We examine the market opportunity and the drivers behind the high levels of transaction activity across the international HCM market.

High valuations and record levels of deal activity over the last 12 months

What is driving valuations and M&A?

People as resources/expenses: Having spent decades installing ERP, SCM and other automation systems, enterprises have now recognized that their people can be their biggest competitive advantage, and also their largest cost item. The ability to drive efficiencies from their workforce is paramount. 

War for talent: A combination of historically low unemployment, rise of the gig economy and a millennial workforce is driving the need to attract, engage and retain talent. 

Skills gap: Increasing need to train employees and provide the L&D platforms, tools, and analytics to deliver and measure.

Need for proactive insights: Pent-up demand in HR to harness data to generate predictive insights to help pro-actively drive business decision making, in line with other areas of enterprise. 

Acceleration of HCM SaaS: HR was one of the earliest consumers of SaaS-like models with Payroll and other SaaS HCM increasingly mainstream.

Bright Future for HCM M&A

Global opportunity: Macro tailwinds will continue to propel the HCM market worldwide driving underlying sector growth. 

Growth of Private Equity capital: Increasing deployment of private equity capital into sector, in particular into Europe.

AI & analytics: Roll out of next-gen data, analytic, and AI platforms to drive forward looking decision making.

High valuation multiples: Sector valuation multiples will continue to outperform non HCM peers, with software and tech-enabled services carrying SaaS multiples. 

One of the few horizontal software markets remaining: A fragmented global market with multiple opportunities for consolidation, through broadening product suites and new market entrants. 

To access the full report click here

This month we published our Annual Marketing Industry M&A Report, providing a global overview of transaction activity and trends in the industry in 2018.  

We have summarized a subset of our insights and data on deal volume, type as well as geography below. 

Specialist Capabilities:

64% of transactions were targeting specific capabilities

• In 2018 the demand for specialist capabilities increased and represented nearly two-thirds of the total acquisitions  
  
  
• Full Service Digital means less and less in a world of more specialisms…  
  
  
• ‘Specialist Digital’ remains the most sought-after specialist capability with 206 transactions announced in the year  
  
  
• ‘Marketing Tech’ continued to be in strong demand in 2018 representing 16% of all deals, compared to 10% in 2016, as a result of further industry expansion and consolidation 

Where are targets located?

In 85% of all transactions the acquirer was either European or American, with 75% being domestic transactions.  

North American companies acquiring in Europe represented the largest proportion of cross-border transactions, 46, followed by European companies acquiring into North America, 33 (of which 20 had UK-based acquirers). 

Transactions by acquirer type

• The proportion of non-traditional Marketing Services acquirers continued to grow in 2018, representing 53% of the total transactions compared to 41% in 2016  
  
  
• The Global Networks continued to represent a smaller proportion of total deals in 2018 (6% compared to 9% in 2016)
  
  
• In 2018 we saw IT Services, Software and Consultancy acquirers further enhancing their digital capabilities in the design and advertising arena, representing 22% of the total deals announced in the year 

To access the full report click here