HCM TECHNOLOGY SECTOR REVIEW | Q1 2019€¦ · rules-based online benefits enrollment, data...

HCM TECHNOLOGY SECTOR REVIEW | Q1 2019

T E C H N O L O G Y , M E D I A & T E L E C O M PAGE | 1

HUMAN CAPITAL MANAGEMENT TECHNOLOGY SECTOR REVIEW | Q1 2019

• 35 professionals across Boston, San Francisco, and London

H A R R I S W I L L I A M S ( “ H W ” ) T E C H N O L O G Y , M E D I A & T E L E C O M ( “ T M T ” ) G R O U P

• 330+ professionals across eight offices globally

• 160+ closed transactions in the last 24 months

• 10 industry groupsH O R I Z O N T A L F O C U S S E C T O R S

• Compliance Software

• CRM and Member Management Software

• Data & Analytics

• Enterprise Software

• Human Capital Management

• Infrastructure & Security Software

• IT & Tech Enabled Services

• Managed Services, Hosting & Data Center Solutions

• Online Marketing, Data & Research

V E R T I C A L F O C U S S E C T O R S

• Architecture, Engineering & Construction

• eCommerce & Retail Software

• Education Technology

• Energy Technology

• Facilities & Real Estate Technology

• Financial Technology

• Government Technology

• Healthcare IT

• Industrial & Supply Chain Software

J E F F B I S T R O N G+1 617-654-2102

A N D Y L E E D+1 415-217-3420

T Y L E R D E W I N G+1 617-654-2133

D A N L I N S A L A T A+1 617-654-2122

S A M H E N D L E R+1 617-654-2117

P R I Y A N K A N A I T H A N I+1 617-654-2115

M I K E W I L K I N S+1 415-217-3411

T H I E R R Y M O N J A U Z E+44 20 7518 8901

J U L I E N O U S S A D O N+44 20 7518 8909

S E L E C T R E C E N T H W H C M T E C H N O L O G Y T R A N S A C T I O N S

Offers courses for healthcare professionals and healthcare organizations & provides an online business-education library

has been acquired by

Provider of emergency care training intended to deliver safety and health compliance to communities and businesses


Provider of time and attendance management, staff scheduling, payroll and security management software products

Developer of business management software for businesses and non-profit organizations in the United Kingdom

has received a majority investment

from

has made a majority investment in

Provider of Workforce Management, Training, and Compliance Solutions for the Healthcare, Financial Services, and Real Estate Industries


Employee scheduling solutions for retail and hospitality sectors


Provider of administrative and clinical software tools as well as health care information management software


Provider of administration software, rules-based online benefits enrollment, data integration, medical and voluntary benefits, broker and HR admin dashboards



Developer of business management software for businesses and non-profit organizations in the United Kingdom

has acquired a majority stake in

E R I K S Z Y N D L A R+1 415-217-3418

Provider of GRC SaaS solutions including credential management and payer enrollment services to healthcare facilities

has acquired



Solutions focused on sourcing, recruiting, interviewing, and on-boarding employees to an

organization

• Employee recruitment, engagement, and retention remain top of mind - especially as job market tightens

• Data-driven / market place tools are increasing connectivity for both enterprises and their contingent / on-demand workers

• Talent tools adopting machine learning, predictive analytics, assessment algorithms, and artificial intelligence

• Real time employee review solutions gaining traction (social, collaboration management, rewards)

• Identification and recruitment of internal and known talent are corporate strategic initiatives

• Learning management systems and corporate learning, training and compliance content increasingly core to HR suite

Solutions focused on optimizing the efficiency and productivity of an

organization’s employees

• “Workforce as a Strategy” is increasingly driving companies to adopt data-driven technologies that remove friction from the employee journey

• Benefits and payroll solutions are fundamental to employee / employer connectivity with engagement and wellness proliferating

• HRIS automation is table-stakes as employers now shifting focus to productivity and collaboration enhancers

• Automated and comprehensive risk management / compliance tools continue to experience strong adoption

• Back office HR Capabilities for on-demand labor market is an emerging market opportunity

• Leading vertical-specific platforms remain highly attractive to investors and acquirers (e.g., retail, healthcare, and hospitality)



• Integrated Time Systems offers time entry, pay rule calculations, labor costing, and scheduling software solutions

• Integrated Time Systems is Ascentis’ third acquisition in six months and furthers the Company’s strategy to provide a fully integrated HCM suite

• The acquisition of Integrated Time Systems through Ascentis’ subsidiary, NOVAtime, not only enhances the Company’s workforce management solutions, but also solidifies Ascentis’ market leading position in the Midwest

EV: Confidential

Rev: Confidential EV / EBITDA: Confidential

EV / Rev: Confidential

• Sage Payroll Solutions (“SPR”), the U.S.-based payroll outsourcing business of The Sage Group PLC, provides payroll solutions to small and midsized companies

• SPR’s counts over 44,000 customers of all sizes and provides integrated HCM, time and attendance, benefit advisory services and more

• The acquisition accelerates iSolved’s growth in the human capital management industry, targeted toward the midmarket, and increases its licensee and partner network as well

EV: Confidential



Sage Payroll Solutions

• Plansource provides SaaS, cloud-based benefits administration technology services.

• The Company offers a platform that automates various benefit transactions and connects employees with the insurance carriers for benefits administration

• Vista’s acquisition of Plansource comes on the heels of a period of robust growth and expansion. With Vista’s backing, Plansource will accelerate its roadmap and plans to achieve real-time integrations with insurance carriers, insightful analytics for all stakeholders, and intuitive tools for self-service, personalization, and communications

EV: Confidential



• Jobvite is a provider of best-of-breed recruiting software with a candidate-centric recruiting model that helps companies engage candidates with meaningful experiences at the right time

• K1’s additional acquisitions provide HCM point solutions: Talemetry is a recruitment marketing company, RolePoint is an employee referral and internal mobility business, and Canvas is a text-based conversational recruiting company

• The unique set of investments creates a business with over 2,000 customers and rapidly accelerates the companies’ product development roadmaps and the integration of their respective customer solutions

EV: $200M



• Ultimate Software is a provider of human capital management software whose product suite includes human resources, payroll, and benefits management functionality

• Ultimate’s solutions manage the complete employee lifecycle from recruitment to retirement, and include talent acquisition and onboarding, performance management, salary planning, budgeting, succession management, reporting, and analytical capabilities

• The deal with Hellman & Friedman will help Ultimate Software make additional investments in products and services

EV: $11.0B

Rev: $1.14B EV / EBITDA: NM

EV / Rev: 9.6x



• The key strategic acquirers have combined for 38 HCM technology related acquisitions since 2015, but two of them (IBM and Oracle) have not completed a HCM acquisition since 2016

• Key strategics accounted for none of the HCM Technology deals in Q1 2019

• Workday and Kronos have established a consistent HCM M&A strategy, accounting for 16 transactions for the last four years

MOST ACTIVE STRATEGIC ACQUIRERS OF HCM TECHNOLOGY ASSETS BY VOLUME1

GLOBAL HCM TECHNOLOGY M&A ACTIVITY1

• There were 23 HCM Technology acquisitions in Q1 2019

• While transaction volume slowed, HCM technology companies remain highly attractive to both strategic and financial acquirers

• Trailing 12 months deal volume remains robust, supported by tuck-in acquisitions and platform building

7

20

612

21

12 12 14 11 14 1217

26

3830

23

43

5549

45

5951

57 59

49 51 51 54

69

93

111117

Q2 - 15 Q3 - 15 Q4 - 15 Q1 - 16 Q2 - 16 Q3 - 16 Q4 - 16 Q1 - 17 Q2 - 17 Q3 - 17 Q4 - 17 Q1 - 18 Q2 - 18 Q3 - 18 Q4 - 18 Q1 - 19

Deals 4Q Trailing Total



Diversified Platforms

ERP Focused Platforms

R E P R E S E N T A T I V E P R O V I D E R S

Focused Solutions

To receive the latest Human Capital Management Technology market

map, please contact HW at [email protected]

mailto:[email protected]



HR

SO

FT

WA

RE

EV / 2019E EBITDA

EV / 2019E Revenue

1.7x 15.5x7.3x

17.8x 63.6x32.9x

BE

NE

FIT

S T

EC

HN

OLO

GY

EV / 2019E EBITDA

EV / 2019E Revenue

1.6x 13.0x4.1x

5.5x 89.6x53.1x

DIV

ER

SIF

IED

PLA

TF

OR

MS

EV / 2019E EBITDA

EV / 2019E Revenue

4.6x 6.6x5.3x

11.3x 15.4x14.9x

60

80

100

120

140

160

Apr-18 Jul-18 Oct-18 Jan-19 Apr-19

S&P 500 HR Software

60

80

100

120

140

160


S&P 500 Benefits Technology

60

80

100

120

140


S&P 500 Diversified Platforms



–

PUBLIC COMPARABLES2

As of March 31, 2019 ($ in millions)

H U M A N R E S O U R C E S S O F T W A R E

D I V E R S I F I E D P L A T F O R M S

B E N E F I T S T E C H N O L O G Y

Automatic Data Processing, Inc. ADP-US $70,385 $69,588 99.9% 40.8% 78.1% 7.3% 6.7% 23.0% 5.1x 4.8x 21.7x 19.4x 38.8x

Workday, Inc. Class A WDAY 41,231 30,277 96.4% 51.7% 151.0% 32.0% 26.2% 17.1% 14.6x 11.8x NM 63.6x NA

Paychex, Inc. PAYX 29,053 28,824 99.3% 30.2% 48.5% 9.9% 10.8% 41.7% 7.9x 7.3x NM 17.8x 30.0x

Ultimate Software Group, Inc. ULTI 10,275 10,459 90.2% 35.5% 70.6% 21.2% 19.7% 24.3% 9.0x 7.5x NM 31.0x 160.0x

Paycom Software, Inc. PAYC 11,068 11,059 99.2% 76.1% 431.3% 30.8% 25.8% 42.5% 19.5x 15.5x NM 38.2x 80.9x

Ceridian HCM Holding, Inc. CDAY-US 6,303 7,154 99.1% NA NA 11.3% 9.2% 21.0% 8.4x 7.7x NM 34.0x NA

Paylocity Holding Corp. PCTY 4,809 4,720 96.4% 74.1% 172.4% 23.6% 21.2% 25.2% 11.5x 9.5x NM 32.9x 92.8x

Cornerstone Ondemand, Inc. CSOD 3,133 3,237 91.0% 40.1% 67.2% 11.6% 4.8% 17.5% 5.8x 5.6x NM NM NA

Upwork, Inc. UPWK-US 796 2,042 76.6% NA NA NA 19.2% 1.5% 3.1x 2.6x NM NM NA

Pluralsight, Inc. Class A PS 1,923 2,358 82.7% NA NA 39.1% 34.5% NM 8.3x 6.2x NM NM NA

Asure Software, Inc. ASUR-US 182 94 30.9% (50.1%) 14.0% 63.4% 18.0% 22.4% 2.0x 1.7x 22.8x NM NA

DHI Group, Inc. DHX-US 131 129 68.6% 51.9% (69.9%) (26.8%) NA NA 0.8x NA 5.1x NA 16.8x

HR Software Median $5,556 $5,937 93.7% 40.8% 70.6% 21.2% 19.2% 22.7% 8.1x 7 .3x 21.7x 32.9x 59.9x

HealthEquity Inc HQY-US $4,327 $4,622 72.8% 22.2% 199.9% (0.6%) 17.8% 40.9% 15.1x 13.0x NM 32.3x 70.1x

Benefitfocus, Inc. BNFT 1,620 1,587 81.6% 103.0% 48.5% 0.8% 17.9% 4.0% 6.3x 5.3x NM 89.6x NA

WageWorks, Inc. WAGE 750 1,505 66.5% (16.5%) (25.4%) 7.1% 1.4% 29.5% 1.6x 1.6x 6.1x 5.5x 39.2x

Castlight Health, Inc. Class B CSLT-US 444 399 63.0% 2.7% 12.6% 19.0% (0.4%) NM 2.8x 2.8x NM 73.9x NA

Benefits Technology Median $1,185 $1,546 69.7% 12.5% 30.5% 3.9% 9.6% 29.5% 4.6x 4.1x 6.1x 53.1x 54.7x

Microsoft Corporation MSFT-US $866,875 $904,861 97.6% 29.2% 113.5% 13.3% 11.3% 41.8% 7.3x 6.6x 17.5x 15.4x 27.4x

Oracle Corporation ORCL-US 210,922 183,562 98.8% 17.4% 31.3% 1.3% 0.6% 46.5% 5.3x 5.3x 12.4x 11.3x 52.7x

SAP SE SAP-DE 141,124 142,081 90.7% 10.7% 42.7% (3.0%) 7.9% 31.3% 4.8x 4.6x 16.8x 14.9x 30.1x

Diversif ied Platforms Median $210,922 $183,562 97 .6% 17 .4% 42.7% 1.3% 7 .9% 41.8% 5.3x 5.3x 16.8x 14.9x 30.1x

Enterprise Market % of 52 1-Year Stock 3-Year Stock Revenue Growth 2018E EBITDA Enterprise Value / Price /

Company Ticker Value Capitalization Week High Performance Performance 2018 2019P Margin LTM Rev. '19P Rev. LTM EBITDA '19P EBITDA Earnings



–

SELECT RECENT M&A TRANSACTIONS2

Announced Date Target/Issuer Buyer Descr iption Enterpr i se Value ($m)

03/26/2019 Entertainment Partners TPG Capital Provides entertainment payroll, workforce management, and other integrated production management solutions. NA

03/25/2019 Plansource Benefits Administration, Inc. Vista Equity Partners Management LLC Operates a technology platform that provides hiring solutions services. NA

03/19/2019 CareATC, Inc. Independence Capital Partners LLC Provides innovation management software for the banks and insurers, manufacturing, and healthcare industries. NA

03/01/2019 TriSure Corp. Alera Group, Inc. Provides staffing services for the transportation industry. NA

03/13/2019 Universal Background Screening, Inc. Sackett National Holdings, Inc. Develops recruitment software, talent management; workforce planning, onboarding, and additional HCM solutions. NA

03/06/2019 Clearview Logix LLC Ceridian HCM Holding, Inc. Provides time management and workplace security solutions. NA

03/04/2019 Integrated Risk Solutions, Inc. HUB International Ltd. Provides technology-enabled payroll and production-management services to the entertainment industry. NA

03/18/2019 Kallidus Ltd. Hellman & Friedman LLC Provides digital marketing and IT services to professionals in finance, healthcare, and additional industries. NA

02/15/2019 TalentRISE LLC Aleron Shared Resources, Inc. Provides training and support services, staffing and recruitment, learning products, market research, and consulting. NA

02/20/2019 API Healthcare Corp. Vendor Credentialing Service LLC Provides electronic recruitment services to healthcare companies. NA

02/14/2019 Veritas Risk Services LLC OneDigital Operates a wellness and health engagement company. NA

02/14/2019 The Alpha Group Agency OneDigital Provides enrollment technology, HR support tools, and access to health and wellbeing experts. NA

02/11/2019 Talemetry K1 Investment Management Provides recruitment marketing technology and services. NA

02/11/2019 RolePoint K1 Investment Management Provides an employee referral and internal mobility services platform. NA

02/11/2019 Canvas K1 Investment Management Provides text-based covnersational recruiting services and solutions. NA

02/11/2019 Jobvite K1 Investment Management Provies recruiting software with a candidate-centric recruiting model to help companies better engage candidates. $200.0

02/04/2019 The Ultimate Software Group, Inc. Hellman & Friedman LLC Provides human resources services, employee benefits, payroll, and risk management services. $11,000.0

01/30/2019 Zugata, Inc. Blackstone Corporate Private Equity Provides management consulting services. NA

01/17/2019 Discovery Benefits WEX Provides employee benefits adminstration services including HSAs and flexible spending account services $425.0

01/15/2019 The Sage Group Plc /Payroll Business/ iSolved HCM Provides service business management software for plumbing and other industries $100.7

01/13/2019 Technologies Peerio Inc. Hellman & Friedman LLC Provides an online education and training platform. NA

01/07/2019 Drive360 Logistics LLC CPPIB Provides technology staffing and consulting services. NA

01/02/2019 Aspect Software, Inc. Vector Capital Management LP Provides survival and industrial skills training services. NA



Note: Financial information presented above represents reported capital raised only.

04/02/19 Series A $45 $52 Kleiner Perkins Provides software that helps start-ups with staff onboarding

03/19/19 Series B $35 $69 Atomico Developer of a cloud-based employee engagement and retention

03/13/19 Series A $9 $11 Accel Recruiting platform that provides a single source for talent teams

03/11/19 Late Stage $51 $64 TIP, Social Capital, & Indaco Ventures Operator of a physical platform designed to connect talent around the world

03/01/19 2nd Seed $3 $5 Entrepreneurs FundProvider of an interview process management platform designed to link interview

candidates with the right interviewers

03/01/19 Series A $11 $14 Battery Ventures Developer of a vendor management SaaS platform

02/28/19 PE Growth $100 $119 Providence Strategic GrowthProvider of a professional social media platform designed to connect the world's

workforce

02/27/19 Series A $13 $18 WeWork Developer of a professional career development platform

02/21/19 Series B $28 $35 EQT VenturesProvider of a talent engagement platform intended to help enterprises to attract,

identify and engage candidates

01/16/19 Series F $12 $17 Beringea Developer of a cloud-based payment management platform

01/10/19 PE Growth $50 $103 Francisco PartnersProvider of a cloud-based platform designed to provide integrated talent

management



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