Human Capital Management Software Market Overview

PRIVATE AND CONFIDENTIAL TECHNOLOGY FOCUS. BROAD REACH. OPTIMAL RESULTS.

Human Capital Management Overview

Peter Falvey

Managing Director

[email protected]

P. 1.617.598.0437

Jeffrey Monk

Analyst

[email protected]

P. 1.617.598.0445

Jeffrey Cook

Vice President

[email protected]

P. 1.617.598.0439

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Human Capital Management Market Remains Active

High-growth sector: Talent management continues to be a priority for executives and is

being driven by changes in how enterprises interact with human capital

HR is increasing in complexity: The emergence of social media, collaboration and

mobility as enterprises continue to align with the ‘Web 2.0’ world creates more opportunity,

but also more challenges, for HR professionals

Highly fragmented market: There is no clear leader in the market, with many point

solutions fighting for share, encouraging players to grow through acquisition

Consolidation is starting: Much of the acquisition and investment activity has been

directed towards enabling and creating talent suites, as SaaS platforms are emerging as

early leaders, a trend we believe will continue in coming quarters

The human capital management sector has been one of the most active

investment and M&A markets in recent years and we expect the trend to continue

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$4.35 $4.52

$5.40

$3.15 $3.78

$5.65

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

2011 2012 2016

Talent Management

HR Core

Market Growth Expected to Continue at Impressive Rate

HR core systems will continue to grow even as they mature while emerging talent

management point solutions are growing 2x as fast

HCM MARKET SIZE

78% of CEOs plan to make changes to talent

strategy, according to PwC survey

SaaS delivery is expanding market. More than

90% of talent inquiries relate to SaaS

deployments

− HR can utilize more solutions for

significantly less cost and risk

Social media has transformed how companies

recruit talent and how they praise talent,

creating an emerging market for sophisticated

social tools

Mobile allows talent management to be utilized

more frequently and more effectively

KEY DRIVERS

Source: IDC, Gartner, Forrester, PwC

$B

$11.1B

$8.3B

$7.5B

4.5% CAGR

10.6% CAGR

7.4% CAGR

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SaaS Suite Vendors Dominate the Market

Source: Gartner, Forrester Research

FORRESTER WAVE GARTNER MAGIC QUADRANT

Although the market is saturated with many high profile point solutions, vendors

offering suites with depth, flexibility and ease-of-use are viewed as market leaders

Leaders are consolidating to succeed

in this extremely competitive market

Focused on SaaS suites with an offering

for both performance and learning

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Talent Management Market Demanding Integration...

Source: Bersin & Associates

GLOBAL TALENT MANAGEMENT MARKET SHARE

With few players holding a significant piece of the market and >50% of the market

made up of smaller solutions, there is significant opportunity for consolidation

LARGE VENDORS NOT IN TOP 7

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...as it is Fragmented Among Three Core Functions

TALENT ACQUISITION TALENT MANAGEMENT HR CORE ADMINISTRATION

While the market has begun consolidating into end-to-end platforms, the bulk of

activity is still happening at the lower end as companies are working to assemble the

leading platform across each of the three major functions of HCM

Finding and retaining employees

with the necessary skills,

experience and cultural fit are key

as companies begin to resume

hiring in earnest

Emergence of more vertical

focused solutions, especially on

the sourcing side (i.e. internships,

executive recruiting, sector

specific jobs)

Primary functions include:

− Sourcing

− Recruiting

− Onboarding

Ensuring that individual

performance and goals are clear

Learning management systems

in place to fill performance gaps

Succession planning – ensuring

employees know the future

opportunities available to them

eLearning providers beginning to

enter this space as solutions

overlap with corporate training

functions

Automating the many disparate

functions in the human

resources department is key

Major Administrative ERP

vendors (Oracle, SAP) now

witnessing disruption from

niche players building platforms

and extending capabilities

beyond basic functions

Primary functions include:

− HR Compliance

− Compensation

management

− Payroll administration

− Benefits administration

− Time and attendance

− Tax filing

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Many Point Solutions and Few Suite Providers

Sc

ale

L

arg

er

Sm

all

er

POINT SOLUTION PROVIDERS

MARKET CONSOLIDATORS

Talent Acquisition HR Core Admin

Candidate-facing Internal

Talent Management

Employee-facing

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HCM Point Solutions Market Map

TALENT ACQUISITION

SOURCING RECRUITING + ONBOARDING

TALENT MANAGEMENT

PERFORMANCE + SUCCESSION TRAINING / LEARNING MANAGEMENT

HR CORE ADMINISTRATION

Sc

ale

S

cale

S

cale

RECOGNITION / REWARDS PAYROLL / BENEFITS / TAX / COMPLIANCE TIME + ATTENDANCE

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Leading Vendors Creating Suites Through Acquisition

The emerging leaders in HCM are vendors who established a large customer base in a

targeted solution and have extended that foothold into surrounding HCM solutions by

building platform suites via acquisition

Heritage Focus Expansion

Recruiting

Platform

Performance

Learning

Payroll

Recruiting

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Recent Strategic M&A Activity

Source: Company Press Releases, SEC Filings, Wall Street Research, CapitalIQ, PitchBook

Target Acquirer Date Solution

February 2014 Talent search engine

February 2014 Online job search portal

October 2013 Talent acquisition and management software

August 2013 Online training for IT professionals

May 2013 Behavioral assessment solutions

December 2012 Time and attendance software for SMBs

September 2012 Online job search portal

September 2012 SaaS social recruiting and networking

September 2012 E-learning and talent management content provider

August 2012 SaaS solutions for recruiting and developing employees

June 2012 Video interviewing platform

April 2012 Performance and succession management software

March 2012 Workforce management software

March 2012 SaaS solutions for organizational change and growth

February 2012 On-demand talent management software

February 2012 Workforce management

February 2012 Workforce training software

= Falvey Partners acted as advisor: case study and process overview in rear of book

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Recent Investment Activity

Target Date Amount / Total

Raised Investors

Feb 2014 $750M (Recap) Blackstone, GIC

Feb 2014 $20M / $26M General Catalyst, KPCB

Feb 2014 $11M / $25M Accel-KKR, Norwest Venture Partners

Jan 2014 $4.5M / $9M Undisclosed

Oct 2013 $16M / $63.8M Starvest, Morgenthaler, Scale, C&B Capital, Intersouth, others

Oct 2013 $25M / $53.5M Sequoia Capital, ICG, Granite Ventures, Peterson Ventures

Sep 2013 $20M / $27.7M Highland Capital Partners

Aug 2013 $10M / $15.5M Rembrandt Venture Partners, The Mayfield Fund

Aug 2013 $16M / $203.5M Foundation Capital, Azure Capital Partners, Intel Capital, Others

Aug 2013 $2M / $3M IrishAngels

Jul 2013 $2.1M / $2.1M Venrock, Maverick Capital, Andreessen, General Catalyst

Jul 2013 $1M / $1M Andreessen, Kapor Capital, Founder Collective, Greylock

Jul 2013 $7M / $11.7M Edison Ventures, Carmel Ventures

Jul 2013 $5.3M / $8.2M Atlas Venture, Google Ventures, NextView Ventures

Jul 2013 $1.5M / $2.3M MMC Ventures


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Recent Investment Activity (cont.)


Target Date Amount / Total

Raised Investors

Jul 2013 $2M / $4.5M Lightbank, NEA, Foundation Capital, Funders Club

Jun 2013 $20M / $20M Emergence Capital Partners, Social+Capital

Jun 2013 $3.5M / $3.5M Battery Ventures, Menlo Ventures

Jun 2013 $25M / $25M Undisclosed

Jun 2013 $4M / $6.5M ARTIS Ventures, Subtraction Capital, Kapor Capital, others

Jun 2013 $3.4M / $5.1M True Ventures, Lerer Ventures, Bullpen Capital

Jun 2013 $2M / $2.4M Cayuga Venture Fund, Rand Capital

May 2013 $15M / $24M Summit Partners, Foundation Capital

May 2013 $10M / $21M SoftBank Capital, Spark Capital, Union Square Ventures

May 2013 $6.5M / $6.5M Mainsail Partners

Apr 2013 $5.5M / $6.5M Capital Indigo, Enzyme Venture Capital, others

Apr 2013 $5M / $5M Boathouse Capital

Apr 2013 $1.3M / $1.3M Andreessen, KPCB, Khosla Ventures, SV Angel, Others

Mar 2013 $7M / $8.7M Grandbanks Capital, Relay Ventures

Mar 2013 $19M / $47.4M Scale Venture Partners, Morgenthaler, Intersouth, Harbert

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MindLeaders is a leading provider of e-learning solutions with integrated talent management

capability, and the number two vendor of “off-the-shelf” e-learning content globally.

MindLeaders’ products and services include e-learning content, talent development, learning

services and social media e-learning courses. Its solutions are delivered over the web via a

Software-as-a-Service (“SaaS”) model. MindLeaders’ heritage in the technology-enabled

learning space spans over 30 years, and over this period it has developed a library of over

3,600 e-learning courses and built strong expertise in instructional design. MindLeaders has

over 1,150 direct customers across industry verticals such as care, hospitality, public sector

and financial services, amongst others. Headquartered in Ireland, it has established a strong

presence in the US and UK, and has been expanding its operations in the Middle East and

APAC.

Client Situation Solutions Results

Drove a highly competitive, focused

marketing process to determine

interest and potential valuation

parameters

Worked with management team to

develop extensive marketing

materials, determine appropriate

buyer outreach and build out a full

data room to streamline the diligence

process

Large international component to the

transaction which needed to be

actively managed

Founder/chairman looking to diversify

his personal holdings and decided now

was the appropriate time to sell the

MindLeaders business

Concurrently, the Company received

an unsolicited offer from its closest

competitor, the largest player in the e-

learning segment - initial unsolicited

offer was not satisfactory

Confidentiality and sequencing of

information flow was extremely

important given the highly competitive

nature of the segment

Approached 47 potential buyers –

both strategic and financial

Held 11 management meetings in the

US, UK and Ireland

Received four indications of interest

from both strategic and financial

buyers

Negotiated extensively with the

eventual buyer and the buyer’s PE

investors

>100% valuation improvement from

unsolicited bid to final purchase price

Case Study: MindLeaders – Sale to Skillsoft

Has been acquired by

A portfolio company of

September 2012

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MindLeaders Process Overview

Number of Companies /

Firms Reached Out To

Companies Contacted

47

Number of Management

Meetings

Number of Parties

Submitting Letters of Intent

In order to maximize value and

generate additional options for

shareholders, the Falvey Partners

team ran a focused process in a

timely manner inclusive of both

financial and strategic buyers,

resulting in 5 LOIs

The team was able to identify and

approach highly relevant parties

and get to market quickly and

delivered LOIs in less than two

months

Streamlined an intense diligence

process which included workflow

from the eventual buyer, their

board, three private equity firms

and lenders to close in a timely

manner

Meetings

11

LOIs

5

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Falvey Partners Snapshot

FOCUS SELECT, RELEVANT TRANSACTION EXPERIENCE

December 2011

Has acquired

July 2012

Has been

acquired by

September 2011

Series D

Convertible

Preferred Stock

led by

September 2012

Has been

acquired by


July 2011

Has been acquired

by a portfolio

company of

April 2011

Has been

acquired by

July 2011

Has been

acquired by

February 2011

Growth equity

investment from

November 2010

Has received an

investment from


October 2010

PGI Notify and Send

platforms acquired by

August 2010

Series C

Convertible

Preferred Stock

Led by

SERVICES

Sell-side or buy-side M&A

Growth capital raising

Board and corporate advisory

SECTOR

Software / SaaS

Tech-enabled business services

IT services

Internet / digital media

COMPANY TYPE

$50M - $250M in enterprise value

Growing, with established scale

Profitable or near-term path to profitability

We are an entrepreneurial investment banking firm focused exclusively on capital

raising and M&A for leading software companies

Founded in 2012 by Peter Falvey and key members of the Morgan Keegan / Revolution Partners team

Falvey Partners professionals have closed dozens of software transactions representing billions of

dollars in transaction value

December 2012

Strategic Minority

Investment from

July 2011

Strategic minority

investment from

May 2014

Has been

acquired by

April 2014

Growth equity

investment from

July 2011

Has been

acquired by

March 2011

Has divested its

diagnostic

solutions unit

August 2010

Two divisions have

been acquired by a

portfolio company of

Human Capital Management Software Market Overview

Technology

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