HCM Industry M&A Consolidation Updates
The rise of “HCM as a Service” has created significant deal opportunities to capitalize on the
move to the cloud and the transition from project services to recurring solutions.
354 deals funded since 2010, with more than $557m funded over the past 2 years.
2019 – AT Kearney acquires Cervello (data analytics implementation consulting firm for Oacle, Salesforce, Birst, Host
Analytics, Anaplan). Undisclosed. (advisor=Equitec).
2019 – Outmatch [Trident Capital] acquires The Devine Group, Pomello, & WePow. “To further strengthen OutMatch
as leader in predictive talent analytics.”
2019 – Payscale acquired by Francisco Partners (advisor=Kirkland) from Warburg Pincus for $325m.
2019 ‐ Engage2Excel Group of Companies, a portfolio company of Comvest Partners, acquired Rideau Inc, a Canada‐
based provider of employee recognition solutions.
2019 – Jobvite [$200m, K1] acquires Rolepoint for $40m, and also Canvas & Talemetry.
2019 – Compensation Advisory Partners acquires Vivient Consulting.
2019 ‐ Eliassen Group, a strategic consulting and talent solutions firm, acquires professional services and management
consulting firm Credere Group.
2019 – BreezyHR acquired by LTG for $12m to expand talent acquisition offerings.
2019 – Hireology raises total funding to $52.5m.
2019 ‐ WorkRamp raises $8mm Series A round from Slack and others, provides modern, certified training.
2019 ‐ Ease raises total funding amount to $27.6m, serves 60k SMBs.
2019 ‐ Riverside Partners’ Portfolio Company Openforce acquires Flexible Workforce, provider of onboarding,
compliance and risk mitigation solutions
2019 – CultreAmp acquires Zugata.
2018 – Onesource launches RPA as a service HR capability.
An industry revolution is coming to the Workforce Management sector so that the right people,
perform the right job, at the right cost.
132 companies funded and 32 WFM acquisitions since 2015.
Formal partnerships are in place for nearly all, but almost all are missing significant WFM modules/features.
2019 – Ascentis acquires Integrated Time Systems and Cincinnati Time Systems.
2019 – Certify acquires Chrome River Tech expense reporting and invoice management for $1b. Combined represents
11000 customers and integrates with SAP, Oracle, NetSuite, Sage Intacct, Microsoft, JD Edwards and QuickBooks.
2019 ‐ ESO Acquires eCore Software, a provider of a WFM tool that delivers employee schedule management, online
time clock and attendance, as well as payroll control. Undisclosed.
2019 ‐ TEAM Software buys Lighthouse Workforce Management platform for contractor management.
2019 – Ximbl, cloud scheduling and time tracking, acquired by Paycor
2019 – Forge acquires ShiftMe
2019 – Vector Solutions acquires CrewSense, employee shift scheudlign and resource management.
Administrative services scope has expanded beyond payroll/HR.
More than 171 acquisitions since 2010 by the top 20 Insurance and Consulting leaders.
2019 ‐ Ultimate Software acquired by private equity firm Hellman & Friedman for $11b.
2019 – iSolved acquires Sage Payroll Solutions for 78m pounds based on 38m revenues and ‐$1m EBITDA. Sage is
selling divisions that do not fit with its business cloud platform.
2019 ‐ Discovery Benefits acquired by WEX Inc. for $425m.
2019 – Morneau Shepell Ltd. acquires Mercer Health & Benefit Pension Plan Administration Business for $57m
2019 – Indio raises total funding amount to $28m, platform that makes it easy for brokers to process E&O and
2019 – Asure Software acquires Payroll Maxx.
2019 – Rose Street Advisors (employee benefits agency) acquires HRM Innovations, HR Consulting and Training firm.
2019 ‐ MG LLC, aka Tranzact marketing services for insurance acquired by Willis Towers Watson.
2019 – iSolved acquires UK payroll, Workforce Management Company.
2019 – PrismHR acquires AgileHR
2019 ‐ Safeguard Global acquires WorkFor and AdminMe to advance global deployment.
2019 – Inova acquires Onesource Business solutions, payroll
2019 – EngagePEO acquired by PEG firm Lightyear Capital. (advisor=PiperJaffray)
2019 – The Segal Group acquires Benz Communications.
Notable deal comparables show impact of solutions coupled with consulting:
Valuation multiples vary by industry and are calibrated based on the financial comparables.
Professional services hae shitorically traded at <1X revenue multiple while scaled outsourcing solutions have traded at >2X.
More than 251 consutling M&A deals between 2017 to 2019 with the majority of subscaled average deal size between $7m to $14m at 0.5X
revenue multiple with 6.8 EBITDA multiple with 65% of deal paid upfront with remainder over 3 years earnourt.
30% premium paid for industry centric, scaled asset (>$20M), with recurring managed solutions.
Human Capital Management Industry Snapshot
The industry that provides Human Capital Management services (HCM) is segmented into the following primary categories.
Category Segment Primary Market Description Vendor Count
9 to 99 employees (EE)
(avg client is 19 EE)
Employer of Record
Bundled HR services
900+ NAPEO.org resellers across less than
Local and configurable services 800 resellers across 10 platforms +
hundreds of niche providers
HRTech 50 to 500 EE Local and/or industry centric 200 proprietary platforms >$1m
Service and cost focused 8,000 brokers
ASOs 100 to 10,000 EE
Unbundled a la carte services
800 resellers + ASOs
40 HR staffing centric firms plus national
and global leaders
HR Consultants All
HR Strategy Consultants
Fractional Interim Consultants
Functional & Competency
200 technology agnostic strategy
consultants plus 40 platform or industry
centric implementation firms >$1m
Multi functional service providers
including BPOs, HROs, RPOs, MSPs
50 global leaders plus hundreds of
Accounting & Services More than 50,000 firms with 5,000 >$1m
Combination of some/all of the above Public, PEG funded, Globals
WFM & ASO Strategic Buyers Snapshot ~ multiple recent HR industry acquisitions:
Acquirer Illustrative Deal Acquisitions
Asure (NASD: ASUR) 22+ deals: Evolution Isystems, TelePayroll, PaySystems, Savers TPA, Mangrove, AustinHR,
One Digital [New Mountain
100+ deals (Benefits agencies) with 5+ HR including FarenheitHR, Susan Crocker HR Consulting, The
Survey Group, Managease, Algentis.
Paychex (NYSE: PAYX) 14+ deals including Lessor Group, HROI‐HR Outsourcing, Oasis
Kronos 11+ deals: SaaSHR, VirtualRoster, Empower, Emlogis, CaptorGroup, SmartTime, Deploy, API Health
Coadvantage [Morgan Stanley] 5+ deals: Remedy, Discovery Outsourcing, TotalHRManagement, PEMCO
Ultimate Software [Hiller] 4+ deals: PeopleDoc, Vestrics, Kanjoya, EmployTouch.
Workday (NYSE: Wday) 12+ deals: AdaptiveIngishts, Platfora,
Outmatch [Trident Capital] 4+ Devine Group, Pomello, WePow, Select International
HCM Midmarket Services Industry Leaders
Communities Implementation HR Pro Staffing
Star Performer Comparables
Revenues per Client vary from $<1k to $1M ACV and Revenues per client vary from $<40k to >$1m
Model Type Services Outsourcing BPaaS
services based on cost
savings via “Lift and
Shift” staffing model
delivered via the cloud for
and recurring services
Project based 1 to 3 years 3+ years
Rev/FTE $200k <$100k >$200k
<10% 20% to 60% >60%
25% to 45% 35% to 55% >55%
<1X 2X >2X
Source: Based on private company award winning top performers.
The BPaaS Industry Solution Model versus traditional Services
HCM Benchmark Comparables
Benchmarks for Award Winners within the Human Resources Industry, from private companies with $2m to $20m in annual revenues.
$275,985 Revenue per Employee
65% Gross Profit Percentage
26% Variable v. Fixed Price Costs
20%+ EBITDA profitability margin
SERVICE MODEL SCALABILITY
$400,500 Billings per Certified Consultant &/or Certified SHRM Pro
8 Net Promoter Score
3:1 Technology Expense to COGS Labor Spend Ratio
91% Customer Retention
$1,025 Monthly recurring HR service revenues per client
>36 months Average client retention duration (months)
M&A corporate development services from M&A deal sourcing to expansion support.
The market for HR technology has evolved beyond modules, point solutions
and platforms to include marketplaces, ecosystem of partnerships, and
industry configured solutions.
HRTech platforms by industry
→ HR technology that wins creates market and industry leadership position.
Backoffice administrative services have grown beyond startup/small business
software supported by a local service provider to robust midmarket industry
solutions. Backoffice Industry segments include:
Unbundled PEOs and ASOs
Payrolling, Contractor and Gig Economy providers
BPO outsourced backoffice administrative services
Outsourced technical services and solutions
→ Consolidation opportunity to create midmarket solutions with both
recurring managed services as well as advisory consulting capabilities.
The market for Human Capital Management extends across the employee
lifecycle and is underserved across the middle market as well as for industry
Partner and consolidation opportunities include:
The rise of “HCM as a Service”
“Solving the Needs of the HR Department”
More than 100,000 SHRM professionals searching for support
More than 200,000 middle market companies annually switch vendors
Lack of industry pre‐configured solutions for the middle‐market
Supporting materials available upon request along with top 3 deal opportunities by industry or solution.