HR software in demand

by Scott Denne

A tight job market is opening exit opportunities for HR software companies. The record-low unemployment rate – it recently dipped below 4% for the first time in more than a decade – has increased interest in owning software developers that help businesses find, retain and train increasingly scarce employees, pushing such acquisitions to a remarkable level.

In the latest example, Cornerstone OnDemand has reached for Workpop, a provider of software for hiring hourly and seasonal workers, as part of the buyer’s revamp of its recruiting suite. As we noted at the time of that company’s last acquisition – back in 2014 – Cornerstone OnDemand hasn’t been much of a buyer, although in making a purchase now, it’s joining a parade of dealmakers scooping up HR software targets.

According to 451 Research’s M&A KnowledgeBase, acquirers have hooked 70 HR software targets, more than any other full year in this decade. Still, in terms of deal value, 2018 isn’t likely to be a record. The year’s total stands at $2.35bn, while two earlier years (2012 and 2014) saw more than $5bn in HR software transactions.

While 2012 and 2014 each had a pair of $1bn-plus deals by Oracle, IBM, SAP and Charthouse Capital, this year’s boom has benefited midmarket targets as we’ve recorded 13 acquisitions valued at $100-500m, two more than any other full year. Although the jobs picture helps juice this market, much of the increase comes through the same trends that bolster the overall software M&A market – increasing activity from private equity firms and a surge in strategic buyers. The former category has already purchased more HR software businesses this year than ever before, while corporate acquirers are heading toward record territory.

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