-by Thomas Rasmussen, Brenon Daly

Rather than hitting the public markets, Authoria has landed in a private equity (PE) portfolio, where it is slated to serve as the initial plank in a rollup in the fragmented human capital management (HCM) market. PE shop Bedford Funding picked up Authoria last week, after checking out the market for about a year and a half. (The guys behind Bedford know a thing or two about market consolidation. Before hanging out a shingle with their $400m buyout fund, the Bedford directors and principals served as executives at ERP rollup Geac, which gobbled up dozens of companies before getting swallowed in a $1bn LBO.)

Its experience with ERP consolidation will likely come in handy for Bedford because we have noted a number of times that the current HCM market – with more than 50 startups, along with three or four large vendors – bears more than a few similarities to the ERP market earlier this decade. The ranks of ERP companies were thinned quite a bit as both strategic and financial acquirers went on shopping sprees. (Oracle, Microsoft and Lawson have all inked significant ERP acquisitions this decade, while PE-backed Infor and Consona got their ERP rollups started in 2002 and 2003, respectively.)

We suspect a similar wave of consolidation may be heading to the HCM market, which covers all the stages of hiring, from pre-employment screening to succession planning. And it’s not a bad time to be a buyer, since HCM valuations are coming down. (Authoria sold for about 1.3x its trailing sales, just half the level Vurv Technology got in its $128.8m sale to Taleo earlier this year. Granted, that’s only one data point, but we’ve heard from sources that the markdown of multiples is being seen across the sector.) Given that, along with Bedford’s stash of cash, we expect the rollup to get rolling very soon. What might it be looking for? Maybe a small vendor that could bolster Authoria’s offering around the early part of the hiring process, such as talent acquisition or screening.

Significant HCM deals since 2007

Date Acquirer Target Deal value Target revenue
September 29, 2008 Bedford Funding Authoria $63.1m $50m*
September 16, 2008 Standard Life Vebnet $43.4m $11.4m
June 9, 2008 US Investigations Services HireRight $195m $72m
May 6, 2008 Taleo Vurv Technology $128.8m $45m*
December 21, 2007 Kohlberg Kravis Roberts & Company Northgate Information Systems $1.2bn $897m
February 4, 2007 Infor Global Solutions Workbrain $197m $96.5m
March 23, 2007 Hellman & Friedman Kronos $1.8bn $599m

Source: The 451 M&A KnowledgeBase *Official 451 Group estimate

An Oak accord

Oak Investment Partners has finally helped broker a marriage for portfolio company Talisma – a full half-decade after the startup stumbled on its way down the aisle. In both cases, however, it isn’t exactly clear whether the investment firm should be sitting on the bride’s side or the groom’s side at the wedding. In fact, Oak would have a seat on both sides of the aisle.

In this go-round for Talisma, Oak’s late-March investment of $50m in nGenera helped the SaaS rollup add Talisma to its portfolio. If the strategy sounds familiar, it’s because Oak, which owns a majority of Talisma, had a nearly identical plan for the CRM vendor in late 2003. In that case, Oak wanted to stitch together Talisma with fellow portfolio company Pivotal Corp, in a deal that valued publicly traded Pivotal at $48m. Just as that deal was heading toward a vote, however, two other companies outbid Oak for Pivotal. (First, it was Onyx Software, then it was CDC Software. Of course, those companies would go at it again three years later when CDC tried to spoil the purchase of Onyx by Consona, which was then known as M2M Holdings.)

What exactly Oak plans to do with its newly enlarged portfolio company, nGenera, is anyone’s guess. However, it could do a lot worse than follow the strategy of Consona, which was taken private by Battery Ventures. Since the LBO, we understand Battery has pulled out something like six times its money from the CRM rollup, which is still rolling along. Maybe nGenera will serve as Oak’s enterprise SaaS rollup. The company has already done six deals – and counting. 

nGenera’s (fka BSG Alliance) acquisitive history

Announced Target Deal value Target description
May 21, 2008 Talisma Not disclosed SaaS customer service automation
March 5, 2008 Iconixx Not disclosed On-demand talent management HR software
Oct. 3, 2007 Industrial Science Not disclosed Business simulation software
Nov. 29, 2007 New Paradigm Not disclosed Research company
Sept. 13, 2007 Kalivo Not disclosed On-demand collaboration provider
May 7, 2007 The Concours Group Not disclosed Research and executive education firm