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Human Capital Management: AI & Changing Work Landscape Set to Drive Robust Sector Growth

1 mar 2024

Our latest report highlights dynamics and developments in the Human Capital Management (“HCM”)  sector.

> Download the full report here

Key developments in the Human Capital Management (“HCM”) sector

  • HCM is projected to experience robust growth, driven by the need for hybrid solutions, focus on employee wellbeing, and the rise of generative AI
  • Rapid technological advancements are taking shape in the sector in the form of workforce upskilling and reskilling, AI and machine learning tools disrupting legacy products, and the rise of people analytics to improve organizational performance
  • Carlsquare is observing heightened near-term M&A activity as financial sponsors prepare assets for 2024 sale and strategic acquirers look to consolidate product offerings by acquiring quality assets

Transaction volume decreased, valuations dropped, and profitability continued to be a core focus for investors in 2023

  • Over the last twelve months, public HCM companies have rebounded from underperforming the broad market indices. Carlsquare believes this is due to a combination of an improving macroeconomic backdrop and enthusiasm around potential U.S. interest rate cuts beginning in Q2 2024
  • In 2023, M&A activity saw lower volume, but higher value of total transactions, compared to 2022, while fundraising activity was lower than 2022 in terms of volume and transaction value. However, both M&A and fundraising activity significantly lagged the recent highs of 2020 and 2021
  • Profitable HCM companies delivering critical, comprehensive solutions to their customers attracted acquisition interest, as evidenced by New Mountain Capital’s acquisition of Virgin Pulse for $3.0B and Rippling’s $0.5B raise from new and existing investors at a valuation of $11.8B. We anticipate this trend will continue in 2024
Human Capital Management: AI & Changing Work Landscape Set to Drive Robust Sector Growth