HCM Technology Market

Update

Q2 2023
01 HCM TECHNOLOGY AT HOULIHAN LOKEY

02 PAYROLL SPOTLIGHT

03 Q2 2023 HCM TECHNOLOGY MARKET UPDATE

04
SELECTED HCM TECHNOLOGY DEALS FROM HOULIHAN
LOKEY

05 OVERVIEW OF THE TECHNOLOGY TEAM AT HOULIHAN LOKEY

01 HCM TECHNOLOGY AT HOULIHAN LOKEY
Houlihan Lokey is a leading global investment bank with expertise in mergers and
acquisitions, capital markets, financial restructuring, and financial and valuation
advisory.
KEY FACTS AND FIGURES

36 ~2,000 313 2,000+ >$6.5B $1.8B

Locations Total Financial Managing Clients Served Market Revenue(3)
Worldwide Professionals Directors(1) Annually Capitalisation(2)

OUR SERVICES OUR COVERAGE AREAS

Corporate Finance Technology Financial Services FinTech

Financial Sponsors
Financial Restructuring Business Services Healthcare
Coverage

Financial and Valuation Equity Capital Consumer, Food,

Industrials
Advisory Markets and Retail

Real Estate, Lodging,

Debt Advisory Energy
and Leisure

(1) As of June 2023; excludes corporate Managing Directors.

(2) As of June 2023.
(3) LTM ended 31 March 2023.

4
Houlihan Lokey is the trusted advisor to more top decision-makers than any other
independent global investment bank.

Financial and Valuation Financial Sponsors

Corporate Finance Financial Restructuring
Advisory Coverage

• No. 1 Global M&A Advisor • No. 1 Global Restructuring • No. 1 Global M&A Fairness • No. 1 Global Advisor to
Under $1 Billion Advisor Opinion Advisor Over the Past Private Equity Firms
25 Years
• Leading Capital Markets • $3.0 Trillion of Aggregate • 1,000+ Sponsors Covered
Advisor Raising More Than Transaction Value • 1,000+ Annual Valuation Globally
$25 Billion in Past Two Years Completed Engagements

2022 M&A Advisory Rankings 2022 Global Distressed Debt & 1998 to 2022 Global M&A Fairness 2022 Most Active Investment Banks to
Global Transactions Under $1 Billion Bankruptcy Restructuring Rankings Advisory Rankings Private Equity – Global
Advisor Deals Advisor Deals Advisor Deals Advisor Deals

1 HoulihanLokey 381 1 Houlihan Lokey 58 1 HoulihanLokey 1,232 1 Houlihan Lokey 242

2 Rothschild 369 2 PJT Partners 30 2 JP Morgan 1,030 2 Lincoln International 192
3 JP Morgan 217 3 Lazard 29 3 Duff & Phelps, A Kroll Business 938 3 Deloitte 190
4 Lazard 206 4 Rothschild 25 4 Morgan Stanley 725 4 Grant Thornton 151
5 Goldman Sachs 203 5 Moelis 21 5 BofA Securities 710 5 Willian Blair & Company 118
Source: Refinitiv. Excludes accounting firms and brokers. Source: Refinitiv.
. Source: Refinitiv. Announced or completed transactions. Source: PitchBook.

5
 Global Leadership Team Built to Advise HCM Platforms

Global HCM Sector Team... …Covering the Entire HCM Ecosystem

Sourcing

Recruitment Marketing

Rob Louv Sascha Pfeiffer Assessments

Managing Director, Managing Director,
Chairman of US Head of European Applicant Tracking & Engagement
Technology Technology
Hiring Tools & Marketplaces
Software/
SaaS Talent Talent Onboarding
Management Acquisition
Payroll
Adrian Reed
Kevin Walsh
Managing Director Managing Director
Data and HCM HRIS
Analytics
Workforce Management

Tech-Enabled Core HR Contingent Labor

Dan Dresner James Local

Services
Compensation & Benefits
Senior Vice Managing Director
President
Performance & Succession

Talent Analytics & Optimization

Learning & Compliance

Melissa Tran Eric Erbeck James Grundy
Employee Engagement
Vice President Senior Vice Vice President
President

20+ 45+ Global

Dedicated HCM bankers based in Completed or announced HCM Single specialised HCM practice
New York, London, Frankfurt, Los M&A transactions since the start across the world
Angeles, Miami, and San Francisco of 2019

6
 Unparalleled Track Record Across the HCM Landscape

has been acquired by

Continuation Fund I
has been acquired by has been acquired by has acquired has received growth financing from has been acquired by
has acquired has been acquired by has been acquired by
has acquired
a portfolio company of

Financing Advisor Financing Advisor Sellside Advisor Sellside Advisor Sellside Advisor Financing Advisor Financial Advisor Sellside Advisor Sellside Advisor
Sellside Advisor

Talent Workforce Learning Hiring Tools and Experience Performance and Workforce Workforce Compensation HR and Tax
Acquisition Management Management Marketplaces Management Succession Management Management Management Compliance

has completed a recapitalization
a portfolio company of
a portfolio company of
a portfolio company of
has received investment from
growth financing led by
has been acquired by has acquired has merged with has sold a minority stake to
has been acquired by

has acquired
received a majority investment from
a portfolio company of

$58,000,000 Switzerland

Financial Opinion Sellside Advisor* Financial Advisor* Fairness Opinion Financial Advisor* Sellside Advisor Financial Advisor* Buyside Advisor* Sellside Advisor* Financing Advisor*

Vertical HCM Workforce Payroll Payroll Workforce Assessments Corporate HR and Payroll Talent Mgmt. HRIS
Management Communications Learning and Recruiting

Funds managed by

a portfolio company of has received an investment through has been acquired by

has been acquired by has confirmed a “pre-packaged” convertible loan from
has received an investment from has merged with Chapter 11 Plan of Reorganization, majority recapitalization by have entered into an agreement to
has been acquired by restructuring $2.1 billion of debt and combine
raising $110 million of new money
investment
merged with a partner company of a portfolio company of

and
and

Sellside Advisor* Sellside Advisor* Sellside Advisor Other Advisor* Sellside Advisor* Company Advisor Other Advisor* Sellside Advisor Sellside Advisor* Fairness Opinion

Internal Payroll Learning Temporary Compliance E- Learning Corporate HR Compliance Workforce HRIS
Communications Management Staffing Learning Management E-Learning Communications

has been acquired by

has been acquired by
a portfolio company of
has been acquired by has been acquired by has received an equity investment
has received a USD 68m growth
has been acquired by from
investment from has been acquired by
has received an investment from

has been acquired by a portfolio company of

Sellside Advisor* Financial Advisor* Sellside Advisor Sellside Advisor* Sellside Advisor Financial Advisor* Sellside Advisor Sellside Advisor* Sellside Advisor* Financial Advisor

Recruitment Workplace Learning Recruitment Learning Learning Talent Analytics Workforce Workforce Employee
Solutions Management Management Solutions Management Management Engagement

Refinancing of

has sold has been acquired by has been acquired by

has been acquired by has sold
majority investment by
has sold a minority stake to has acquired has received a majority investment
a portfolio company of by

to
to

Sellside Advisor Exclusive Financial Advisor*

Sellside Advisor* Financial Advisor* Buyside Advisor* Sellside Advisor* Sellside Advisor* Sellside Advisor Sellside Advisor* Sellside Advisor*

HR Solutions Workforce HRIS Accounting, Tax, Staffing and Payroll Contingent Labor Workforce HR and Enterprise
Platform Management HR, and Payroll Recruitment Management Administration Mobility

*Selected transactions were executed by Houlihan Lokey professionals while at other firms acquired by Houlihan Lokey or by professionals from a Houlihan Lokey joint venture company.
Tombstones included herein represent transactions closed from 2010 forward.

7
 Representative HCM Landscape Talent
Acquisition
Core HR
Talent
Management

SOURCING RECRUITMENT ASSESSMENTS HIRING TOOLS & APPLICANT ONBOARDING

MARKETING MARKETPLACES TRACKING &
ENGAGEMENT

PAYROLL HRIS WORKFORCE MANAGEMENT CONTINGENT COMPENSATION

LABOR & BENEFITS

PERFORMANCE & TALENT ANALYTICS & LEARNING & COMPLIANCE EMPLOYEE ENGAGEMENT
SUCCESSION OPTIMIZATION

Sources: Pitchbook, CB Insights, company filings, company websites, press releases.

8
02 PAYROLL SPOTLIGHT
Executive Summary

Mission-Critical
Payroll is mission-
critical to the success
of companies, but
investment in
technology and
innovation has lagged
behind other areas of
HR, such as workforce
Strategic Tool
The employer/
employee relationship
is changing at a faster
pace than ever before,
increasing the
demands on payroll
to be a strategic tool
for enhancing
Global Talent
Global talent and the
geographical spread
of a highly mobile
workforce are further
stressing the payroll
system and have
driven the emergence
of strategic employer-
EXECUTIVE SUMMARY
Growth Market Data Security Evolving Role Investment Opportunity
The payroll and EOR Cloud adoption has Over the next few years, All of this has culminated
market is vast, with heightened the we expect the perception in payroll and EOR being
regulatory complexity, importance of of payroll to shift from an attractive markets to invest
emerging markets, cybersecurity and inhibitor of employee in and with consolidation
and the convergence data protection happiness (manifesting in a key topic for companies
of software and across the end-to- low payroll NPS) to an reviewing their payroll
services driving end payroll cycle. integral part of business ecosystem, M&A will
growth in strategy and the continue to be a core

TRENDS AND THEMES

management and employee of-record (EOR) the future. backbone of connecting a tenant of growth in a
employee experience. engagement. platforms. global talent marketplace. fragmented landscape.

Payroll Market Remains Payroll Listed Peers Operate at a

KEY TRENDS AND THEMES Page Stable and Growing(1)* Premium to HCM Peers(2)(3)

The changing makeup of the workforce and the employer/employee

relationship is having a profound impact on how people are hired 12 $14.
and paid.
9bn

VENDOR LANDSCAPE
Despite technology advances, getting payroll basics right remains a
challenge for many and is prohibiting the digital transformation of 13
the payroll function.

$10.0bn Narrow Payroll Broader

Data and automation are key business priorities, yet siloed systems 19.8x 17.6x

14
Software HCM Software
and a lack of integration limit the value that can be extracted from
payroll data.

M&A Activity Has Continued Unabated

15
Growing globalisation and remote workforces are driving the need
for global payroll capabilities.

VALUATION SNAPSHOT
The critical role of payroll technology and services, and long-term
opportunities are underscored by continuing investor appetite and 16
premium valuation of listed peers.

2021A 2028F Precedent 5.8x 16.5x

(1) Business Research Insights, Payroll Outsourcing Market Report Overview (May 2023); (2) EV/EBITDA FY +1, as of 6
June 2023; (3) Narrow Payroll Peers Defined as Those With Payroll dominant Product Offerings. Transactions EV/Revenue EV/EBITDA
*Numbers based on source estimates.

10
Houlihan Lokey’s HCM Tech Spotlight Dinner: Payroll & EOR

EXECUTIVE SUMMARY
Exclusive Dinner 30+ 5
Held in London
Industry Leaders and Panel
May 25
Capital Providers Attended Participants

TRENDS AND THEMES

INDU STRY LE A DER S

C A P ITA L P RO VIDER S
VENDOR LANDSCAPE
A facilitated discussion covering
the latest takes on:
• The changing employee/employer
relationship
• Getting the payroll basics right
• Touchless payroll

VALUATION SNAPSHOT
• Adoption of the hybrid model
• Payroll and EOR investment thesis

11
Payroll and the Evolution in the Employer/Employee Relationship

EXECUTIVE SUMMARY
War for Talent
Over recent years there has been a power shift in the balance of the employer/employee relationship. There
CHANGING FOCUS AND PRIORITIES
is a ‘war for talent’ with the inexorable rise of flexible working changing the focus of employees. Job
satisfaction in all its forms and life outside work are becoming increasingly important for employees, forcing
businesses to rethink how they engage and motivate their workforce. ECONOMIC EMERGING
CYCLES MARKETS
Global Workforce
Borderless talent is allowing industries and companies to look beyond geographical boundaries to source the GOVERNMENT
GLOBAL EVENTS
best talent. Advancements in technology facilitate remote/hybrid working, with many employees reassessing REGULATION
where they want to be located. This has stimulated the need for EOR solutions to help navigate the local payroll

TRENDS AND THEMES

complexities along with global mobility platforms to help companies leverage their existing workforce. TECHNOLOGICAL INNOVATION

Evolution in Employment Arrangements

As well as the influence of borderless talent, the makeup of the workforce is undergoing significant change. EXTERNAL
The emergence of the contract worker, particularly prevalent in the pharma, tech, and distribution
industries(1), has increased the complexity of scheduling, onboarding, benefits and, ultimately, payroll. Faster
payroll processing capabilities are required to make same-day pay for contract, shift and ‘gig’ employees,
which can only be met through greater integration and data flow across multiple HCM systems to accurately
calculate earned wages across the end-to-end payroll cycle. EMPLOYER EMPLOYEE
Flexible Working
Remote working has become embedded post-COVID-19, the financial ramifications have resulted in hidden AGEING BORDERLESS
DIGITALLY NATIVE FLEXIBLE PAY
WORKFORCE TALENT
costs and compliance complexities that are yet to be fully realised or addressed by employers and
employees. Distributed employees now need to pay close attention to employment taxation and regulation CREATIVE PAY PERSONAL
DEI
in the countries and states where they live and work.(2) COMPENSATION TRANSPARENCY WELLBEING

VENDOR LANDSCAPE
Digital Payroll EMPLOYEE ORGANISATIONAL HYBRID WORK / LIFE
External factors, such as technological advancements and the digitally native generation entering the ENGAGEMENT CULTURE WORKING BALANCE
workplace, are also disrupting traditional payroll practices. Post-COVID-19 arrangements and technology
change is having a material impact on how employees are getting paid globally, with a greater shift to digital
payroll in emerging markets and innovative ways of paying employees, such as digital wallets and prepaid
71% 76%
cards. of employees would consider a new
of companies said they had no plans job if they discovered there was an
Inflationary Forces and Cost of Living to implement on-demand pay(3) unfair gender pay gap(4)
Inflation is having a material impact on both margins for companies and the cost of living for employees. For
many companies, increasing salaries at a relative rate is unfeasible and is forcing companies to look for
creative compensation packages that go beyond salaries. Greater benefits packages, financial wellness, and 61% 53%
flexible (on-demand) pay are just a few examples of substitutes employers are exploring. of companies are focused on of employees would accept a pay cut
resolving pay equality issues to if it meant improving their work-life
Changing Regulatory Landscape improve the employee experience(3) balance(4)

VALUATION SNAPSHOT
The ever-changing regulatory landscape at times overlaps with the sentiment of employees. The increasing

36% 71%
regulatory burden on the employer, i.e. the EU adoption of the Equal Pay and Pay Transparency Directive, is
also an opportunity for companies to look more appealing to current and future employees by having a
comprehensive pay equality program that promotes diversity, equity and inclusion. of companies have no plans to of employees would like more
support pay transparency initiatives(3) flexibility as to when they work(4)
(1) Josh Bersin, How to Fulfil the Dream of Equal pay for Equal Work (2023); (2) UKG, Workforce Institute ‘Our
2023 Workplace Predictions’ (2023); (3) Ceridian, Future of Payroll Survey (2022); (4) ADP, People at Work 2022:
A Global Workforce View.

12
The Challenge of Getting Payroll Basics Right

EXECUTIVE SUMMARY
KEY PAYROLL KEY STATS
METRICS

Digital Transformation: While many HR discussions evolve around emerging themes in the workforce (flexible working, DEI, RPA etc.),
pay remains the most important entitlement that an employer provides and yet the payroll function continues to lag behind other 40%
areas on the digital transformation journey. of companies still use
Data Integrity: Many employers still struggle to get the basics right: data reliability, standardised payroll processes, manual Employees Paid Late/ spreadsheets(1)
spreadsheets, and human error are all key challenges payroll teams face on a regular basis. Total Employees Paid

Basics vs. Innovation: Until companies get the basics right across the end-to-end payroll process, the true potential of new
innovations and payroll data is going to go unutilised.
62%
of CIOs have made

TRENDS AND THEMES

Fear of Failure: Even where payroll technology has been adopted, the fear of failure is driving reluctance within payroll teams to increasing operational
forego manual processes; this duplication not only impacts efficiency but inevitably leads to the problem teams were attempting to efficiencies a priority(2)
avoid in the first instance: payroll errors. Payroll Calendar
Length
Security Concerns: This is being further compounded by compliance and security becoming increasingly tougher to manage for
multiple stakeholders. With significant fines for non-compliance, getting this wrong can be expensive and brand damaging; data
security is no longer a nice to have. It’s a must-have.
69%
of companies have
issues with their
payroll data(3)
Total Incorrect
Payroll Inaccuracy(5) Payroll Errors in the News
31%
Pay Slips
Payment problems continue to plague workers
For at least 18 months, Amazon had been of companies don’t’
and employers, and the situation appears to
underpaying new parents, patients dealing with have any defined

VENDOR LANDSCAPE
becoming more acute. medical crises, and other vulnerable workers on
payroll key
leave. As many as 179 of Amazon’s warehouses
2021 2022 had potentially been affected.(6) Defects Prevented performance
by Payroll indicators(2)
18%

61%
Always/Often Paid Late Next was forced to assign a dedicated team to
23% identify payroll errors and pay missing wages after
staff were underpaid by as much as £200 for
Always/Often Incorrectly 15% of companies were too
several months after the implementation of a new
Paid 21% payroll platform.(7) busy dealing with
Supplementary payroll queries to focus
16% Runs Outside the on more strategic
Always/Often Overpaid Asda external payroll provider made
20%
approximately 11,000 errors over several months, Regular Schedule initiatives(4)
affecting the wages of 5,500 staff, with some

VALUATION SNAPSHOT
20%

27%
Always/Often Underpaid workers losing out as much as £500.(8)
24%

of employee data
(1) Alight, Global Payroll Complexity Index 2021; (2) Papaya Global, Enterprise Playbook for Global Payroll; (3) Ceridian, Future of Payroll Survey (2022); (4) The Employees Incorrectly breaches in the past
Potential of Payroll: Global Payroll Survey 2022; (5) ADP, People at Work 2022: A Global Workforce View; (6) The New York Times, Inside Amazon’s Worst Paid/Total Employees two years were the
Human Resources Problem (2021); (7) The Guardian, Next apologises to Staff After IT problems Cause Months of Underpaying (2022); (8) Global Payroll Paid result of human error(3)
Association, Monthly Payroll Errors Leave Asda Employees ‘Skipping Meals’ (2022)

13
 BENEFITS OF GREATER
Digital Transformation and Automation in Payroll

EXECUTIVE SUMMARY
AUTOMATION AND DIGITAL
TRANSFORMATION

Automation vs. Manual Data Analysis Regulatory Trends Increased Efficiency

The vast quantity of data needed to deliver
payroll effectively is extremely content-rich.
Those companies that have automated their
manual payroll processes, freeing up payroll
experts’ time, have started to leverage the data
to inform trends, strategies, and establish a
competitive advantage in the ‘war for talent’.
Extracting, analysing, and utilising the data
available is a challenge. There is a growing
need to give sufficient training to payroll
teams to achieve this. Indeed, Human
Resources Analytics Manager has been the
second-fastest-growing position in the US
over the past five years.(1)
With increasing regulation across the globe
on pay transparency, business leaders are
increasingly showing the data and metrics
behind their decisions to ensure compliance
but also foster greater loyalty, trust, and
productivity from their people.(2)
• Optimising workflows(3) by creating
automated, standardised payroll processes
minimises the risk of human error.
• Reduced manual spreadsheets and greater
integration of systems reduces the need to
manually upload information.
• Out-of-box APIs are easing process
configuration and the burden of IT team

TRENDS AND THEMES

during onboarding.

PAYROLL DIGITAL THREAD

Improved Employee Experience
Data Integrity Challenge Operational Data Dissemination
• Self-service tools facilitating employee
onboarding, payroll set-up and access to
employee benefits while alleviating the burden
on requests into the payroll team.
Until there is greater automation and data
Data Inputs Data Outputs •
capture, faster payroll processing is going to be
limited, hindering flexible workforce and pay.
Fewer manual errors reduce the financial stress
Collective Employer Employee Third-Party •
Benefits Educational on employees from late or incorrect pay.
Agreements
Analytics and Financial
Bankruptcies
Government Benchmarking Wellness
Workflow

VENDOR LANDSCAPE
ESPP Expenses
Loans Greater Strategic Insights
Orchestration Pay
Post-Work Compliance Credit Checks • Providing greater alignment of data between
Pension Personal Details Transparency
Funds payroll, HR, finance, and treasury functions will
inform the overall business strategy.
Cost Personal Tax
Regulation Sick Leave Social Services Fraud • Tighter management of payroll costs with
Management Requirements
global visibility over time, resources, and costs.
Time and Total Worker Self-Service Legal • Growing need to consult payroll data to inform
Tax Vacation DEI(4,5) strategies and total worker health by
Attendance Health Tools Compliance understanding the utilisation of holiday, health,
and reward programmes.

Automation vs. manual Operational challenges Enhanced security

VALUATION SNAPSHOT
• Organisations that had improved cyber
Workforce flexibility resilience over the past two years have
Remote, consolidated tech vendors as a simplification
Local, Direct Global Expats EOR Contractors Gig move.(6)
Multi-Geo
• Reduced risk of security breaches when sensitive
(1) LinkedIn Jobs on the Rise 2023: 25 U.S Roles That Are Growing in Demand (Jan. 2023); (2) UKG: Workforce Institute ‘Our 2023 Workplace Predictions’ (Jan. 2023); (3) 65% of Payroll payroll data isn’t handled manually.
Processing, Audits and Managed Services Will Be Automated and Processed With No Manual Interventions by 2025 (Gartner, Market Guide for Multicountry Payroll Solutions (2022)); (4) • Electronic transactions that facilitate easier
81% of Companies Are Now consulting Payroll Data to Inform Their DEI strategies; (5) ADP, How to Use Payroll Data for Good (Jan. 2023); (6) PWCs 2022 Global Digital Trust Insights auditing reduce the risk of non-compliance and
Trust Survey. payroll fraud.

14
Adoption of the Hybrid Payroll Model

EXECUTIVE SUMMARY
KEY STATS

42%
Evolving Payroll Strategies: As organisations scale from SMEs to MNCs, the optimal payroll strategy invariably shifts to help navigate increasingly complex payroll requirements. To
service this complexity, organisations at first invariably attempt to stitch together a patchwork quilt of vendors, from payroll administration software, payroll bureaus, payroll managed
service providers, HCM software with built-in payroll capabilities through to global payroll and aggregation software platforms. It is dealing with this transition and operational
challenges that leads to the fear of inaccurate or missed payroll and is a key driver for digital transformation in payroll. of companies
Hybrid Payroll Delivery: The resultant operational challenge of managing a myriad of different vendors, each with its own unique data formats and process requirements, has led to outsourced payroll
growing payroll consolidation. With no truly global payroll provider and companies having, on average, five payroll providers (growing to nine for companies operating in more than due to intense
30 countries), companies are forced to adopt a hybrid model to streamline operations across in-house payroll functions and a smaller group of outsourced vendors. With payroll
talent and knowledge becoming hard to find and retain, remote payroll processing allows companies to benefit from in-country partners (ICPs) local knowledge of government
regulatory
directives, domestic tax regulation and benefit entitlements. environments(2)

TRENDS AND THEMES

Rise of EOR: Payroll consolidation is also being augmented by EOR providers who are benefiting from organisations’ need to adapt their strategy around remote workforces. EOR
providers are no longer seen as an interim compliance and cost optimisation solution but as a strategic solution for accessing and retaining global talent in non-core territories.

61%
Data Management and Visualisation: For those companies yet to adopt the hybrid model or consolidate their payroll vendors, the emergence of payroll workflow orchestration
platforms (such as Payslip) are an alternative approach for in-house payroll functions, facilitating the extraction of payroll data in a standardized format from HRIS and workforce
management platforms for local ICPs to process. These platforms provide a single, enterprise-wide interface for all global payroll operations enabling greater reporting and analysis of
workforce trends.
of companies have
HYBRID PAYROLL MODEL GLOBAL PAYROLL COMPLEXITY(2) outsourced some
or all of their
Europe continues to be the most complex geography for payroll,
Global Payroll Vendor accounting for over half of the countries in the Top 10 Global
payroll
Payroll Complexity Index, which ranks complexity based on operations(2)
mandatory legislative, reporting, process, and security
regulations. The top 10 countries for complexity are:

VENDOR LANDSCAPE
Domestic HQ Payroll Vendor

62%
Capabilities

1 France
In-House

Employer of Record
In-Country

In-Country

In-Country
Partner

Partner

Partner

2 Italy of companies with

3 Belgium six or more payroll
1 2 3 vendors incurred
4 Germany payroll-related
fines in the past
5 Spain
five years(2)
6 Poland

VALUATION SNAPSHOT
In-House Payroll Function 7 Russia

8 Switzerland 32%
HRIS/Workforce Management Platform
9 Japan of companies
operate a global
Note: Arrows denote movement in ranking between 2019 and 2021. 10 United States
(1) Deel, How to Pay Different Types of Remote Workers in Multiple Countries (2023); (2) 2021 EY Global Payroll payroll function(2)
Survey.

15
Investment Opportunities Within Payroll

EXECUTIVE SUMMARY
INVESTMENT THESIS

Truly Mission-Critical: The mission-critical nature of payroll is driving strong investor appetite and M&A
activity for payroll platforms, with many having developed an internal investment thesis on the
opportunities within the market.
Proven M&A Model: M&A has been a tried and tested method of accelerating organic growth that
balances the defensive, low-churn nature of vendors with customer wallet expansion. M&A strategy has
taken two forms: 1) stay pure to payroll and expand geographically vs. 2) payroll as the foundation of a
broader HCM platform by expanding product capabilities.
Platform Scarcity: The scarcity value of sizeable payroll platforms in the market, demand from both
investors and strategic parties alike and strong unit economics have manifested in premium valuations
TOTAL ADDRESSABLE MARKET
• The global payroll outsourcing market in 2021 was $10 billion growing at a CAGR
of 6%,(1) with significant white space in undeveloped markets and advancements
in cloud platforms driving significant transformation in the space.
• Standardisation is a key theme with a fragmented market beyond the large global
players (ADP, Paycom, Workday, Paylocity, etc.), providing significant M&A
opportunities.

TRENDS AND THEMES

being achieved for vendors that have a highly differentiated proposition, who can demonstrate strong
growth and enjoy a dominant position within a particular geography or segment.
Market Dynamics: Due to the large, stable and growing market, driven by cloud adoption and continued
innovation, we expect to see continued interest in payroll platforms. However, there is likely to be greater
scrutiny on the emerging trends of convergence of software and services, the impact of automation, and
AI on operational leverage, workforce trends, and security.
PAYROLL BUSINESS KPIS
BARRIERS TO ENTRY
• Lack of skilled payroll expertise and underestimation of the complex skills
required to ensure accurate, compliant, and timely payroll execution.
• A must-have solution for companies challenged by rapidly changing payroll
regulations (resulting in the need for in-country knowledge and support) and
associated high cost of failure has prohibited new entrants unless through M&A.

As well as the standard KPIs that need to be tracked, there are specific payroll KPIs that will help
differentiate vendors against competitors. KPIs should be tracked on a monthly and YTD basis, with CORE SYSTEM OF RECORD
evolution over time alongside customer payroll metrics that demonstrate ROI.
• Payroll is seen as the driver for the employee system of record and sits at the

VENDOR LANDSCAPE
centre of the broader HCM ecosystem.

01 02 03 • The mission-critical nature of payroll, combined with the apprehension for

wholesale change and lack of in-house capability to manage large-scale payroll
Quality of Earnings Business Model Customers transformation, results in very sticky customer bases for payroll vendors.

• Revenue growth • Rule of 40 • Customer wallet share PRODUCT EXPANSION

• Significant opportunity to expand product functionality and increase customer
• Transactional revenue • Operational scalability • Payslip expansion
wallet share through treasury services, new payroll innovation, e.g. on-demand
% (monthly payslip) (software vs. services) (FTE growth)
pay and adjacent HCM modules.
• NRR • Geographic maturity • Onboarding cycle • Payroll data monetisation is expected to become a new avenue for revenue
(direct vs. ICP) (complexity) generation as payroll vendors start to utilise the rich data within their systems.
Gross margin

VALUATION SNAPSHOT
•
• Technological purity • NPS
• Contracted ARR
(implementation cycle) • Pipeline velocity
FINANCIAL KPI
• Favourable pricing model built on # payslips plus the ‘land and expand’
KPIs With increased Scrutiny for Payroll Vendors Standard KPIs opportunity drives strong unit economics, including recurring revenue, growth, and
NRR.
• Potential for strong profit margins from the complex nature of payroll, with
(1) Business Research Insights, Payroll Outsourcing Market Report Overview (May 2023).
increased automation driving reduced manual intervention.
16
European Payroll and EOR Vendor Landscape

EXECUTIVE SUMMARY
Payroll

*Subsidiary of Iris

*Recently acquired by UKG

TRENDS AND THEMES

* Earned wage access
* Earned wage access

* Earned wage access *Earned wage access

*Earned wage access

*Owned by SDWorx

*Earned wage access/

*Payroll divisions of
on demand capability

VENDOR LANDSCAPE
*Subsidiary of Elmo software

*Earned wage access/

on demand capability

VALUATION SNAPSHOT
*Subsidiary of Visma

Service Providers EOR HCM Platform

Small Medium Large

17
Payroll Software Valuations Have Traded at a Premium to Broader
HCM Software Peers Over the L5Y

EXECUTIVE SUMMARY
EV/Sales FY+1 EV/EBITDA FY+1
Narrow Payroll Software Narrow Payroll Software Narrow Payroll Software
L5Y Median Narrow Payroll Software
Broader HCM Software L5Y Median
Broader HCM Software Broader HCM Software
Broader HCM Software
L5Y Median L5Y Median
17.5x 35.0x
Current L5Y
level Median
15.0x 30.0x

TRENDS AND THEMES

7.2x 9.1x

12.5x 4.9x 5.3x 25.0x

10.0x 20.0x

7.5x 15.0x

Current L5Y
5.0x 10.0x
level Median

19.8x 21.2x

VENDOR LANDSCAPE
2.5x
5.0x
17.1x 17.7x

Jan-19 Jan-20 Jan-21 Jan-22 Jan-23

Jan-19 Jan-20 Jan-21 Jan-22 Jan-23

“We continue to remain positive within the

“SaaS Payroll / HR companies continue to "Due to the vast number of integrations Payroll/HCM subsector. […] similar level of
enjoy the benefits of needed with organizations underlying existing outperformance vs. last quarter with the top
1) pandemic push-out vs. pull-forward […], systems and the recurring nature line reflecting (1) continued momentum from
"[…] we believe payroll outperforms in a a favorable HR/payroll backdrop and secular

VALUATION SNAPSHOT
2) minimal exposure to international of payroll processing, contracts span
markets […], and several years and relationships tend to be very late-cycle environment as the industry is trends towards cloud; (2) steady employment
3) a rising rate environment […].” sticky." less cyclical with secular growth […].“ backdrop; (3) some upside to float.”

J.P. Morgan, 7 Feb. 2023 UBS, 1 June 2023 Credit Suisse, 28 April 2023 Deutsche Bank, 17 April 2023

Note: EV/Sales multiples >25x and EV/EBITDA multiples >45x deemed as not meaningful (n.m.).
Source: CapIQ as at 05/06/2023.

18
Payroll Software Vendors Demonstrate Strong Unit Economics
Across Sales Growth and Rule of 40…

EXECUTIVE SUMMARY
YoY Sales Growth (2022A–2023E)

Payroll Software HCM Peers

Median: Median:
21.0% 7.1%

27%

TRENDS AND THEMES

25% 25%
22%
20%
16%
12% 11% 11%
7% 7% 7% 7% 7%
5%
3% 1%
1% 1%

Rule of 40 2023E

VENDOR LANDSCAPE
Payroll Software HCM Peers

Median: Median:
51.8% 32.4%

67%
59% 60%
52% 52% 51% 53%
45% 42%
35% 35% 33% 32%
27% 27%
22% 22%
16%

VALUATION SNAPSHOT
13%

Source: CapIQ as at 05/06/2023.

19
…But Gross Margins Operate Slightly Below That of Broader HCM Peers, Reflective of the
Complexity and Servicing Levels Required

EXECUTIVE SUMMARY
Gross Margin 2023E

Payroll Software HCM Peers

Median: Median:
70.1% 75.1%

TRENDS AND THEMES

93% 87%
85% 82% 83% 81%
73% 79% 75% 73% 75%
72% 69%
56% 58%
45% 47% 45%

EBITDA Margin 2023E

VENDOR LANDSCAPE
Payroll Software HCM Peers

Median: Median:
30.5% 24.6%

48% 46%
45% 42% 40%
32% 29% 32%
28% 25% 26%
25% 25% 22%
21%
14% 15%

VALUATION SNAPSHOT
6% 8%

Source: CapIQ as at 05/06/2023.

20
Deal Activity in the Sector Remains Strong Across Strategics and Investors…

EXECUTIVE SUMMARY
Date Target Buyer EV (m) EV/Sales EBITDA Margin EV/EBITDA

Jun-23 n.a. n.a. n.a. n.a.

Apr-23 n.a. n.a. n.a. n.a.

Feb-23 n.a. n.a. n.a. n.a.

Nov-22 n.a. n.a. n.a. n.a.

TRENDS AND THEMES

Nov-22 n.a. n.a. n.a. n.a.

Oct-22 n.a. n.a. n.a. n.a.

Sep-22 €171 3.3x 23% 14.3x

May-22 n.a. n.a. n.a. n.a.

Dec-21 13.4x 35.9x

Dec-21 n.a. n.a. Confidential(1)n.a. n.a.

Sep-21 €51 n.a. n.a. n.a.

Apr-21 n.a. n.a. n.a. n.a.

VENDOR LANDSCAPE
Feb-21 £365 5.1x n.a. n.a.

Jul-20 €600 6.0x 50% 12.0x

Jan-20 £103 4.4x 33% 13.4x

Dec-19 €2,000 14.0x 51% 27.4x

Nov-19 €264 5.7x 40% 14.3x

Aug-19 £120 5.4x 28% 19.2x

Aug-18 n.a. n.a. n.a. n.a.

May-18 €1,482 9.3x 43% 21.5x

VALUATION SNAPSHOT
Mar-18 €122 n.a. n.a. n.a.

Median 5.8x 39.5% 16.5x

(1) Confidential, but included in median analysis; n.a. = not available; n.m. = not meaningful.
Sources: Mergermarket, 451 Research, Megabuyte, Company information (as of 05/06/2023).

21
…Along With High Fundraising Activity Where High Valuation Levels Have Been Achieved

EXECUTIVE SUMMARY
Date Target Selected Investor(s) Series Type Deal Size (€m) Post Money Valuation (€m)

Mar-23 Series E 470 11,042

Feb-23 & other Seed Round 3 n.a.

Nov-22 Series A 58 n.a.

Nov-22 & other

Series A 32 78

TRENDS AND THEMES

1)
Jun-22 & other Series B 47 190

May-22 & other Series B 377 n.a.

May-22 & other Series D3 47 11,330

May-22 & other Series B 23 59

May-22 & other

Series D 232 10,455

Apr-22 Series C 159 n.a.

Mar-22 Series A 2 20

Mar-22 & other Series C 89 1,420

VENDOR LANDSCAPE
Feb-22 Series A 12 n.a.

Jan-22 & other

Series E 254 1,820

Dec-21 & other

Late Stage 44 119

Oct-21 Confidential(2)

Nov-21 & other

Series B 86 897

Sep-21 & other Series B 40 200

Jul-21 & other Series D 358 4,640

May-21 Series A1 8 n.a.

VALUATION SNAPSHOT
& other

Mar-21 & other

Series D 90 485

Dec-20 Early Stage 41 488

Median 487
(1) Based on USD/EUR FX rate of 0.9494 as of 22 June 2022. (2) Confidential, but not included in median analysis; n.a. = not available.
Sources: PitchBook, company information as of 5 June 2023.

22
Most Active Strategic Acquirers

EXECUTIVE SUMMARY
# Payroll Investments
Company (Since 1 Jan. 2018) 2018 2019 2020 2021 2022 2023

TRENDS AND THEMES

7

VENDOR LANDSCAPE
4

VALUATION SNAPSHOT
3
Source: Mergermarket as of 5 June 2023.

23
Most Active Financial Sponsors

EXECUTIVE SUMMARY
# Payroll Investments
Company (Since 1 Jan. 2018) 2018 2019 2020 2021 2022 2023

TRENDS AND THEMES

7

VENDOR LANDSCAPE
4

VALUATION SNAPSHOT
3
Source: Mergermarket as of 05 June 2023.

24
03 Q2 2023 HCM TECHNOLOGY MARKET UPDATE
Executive Summary – 2023 Market Update
HCM Investment Remains Below Record Pandemic Levels as a Market Pullback Causes Investors to Reevaluate Theses in the Category.

• Despite public market valuations, investment activity continues in HCM technology as investors seek to capitalise on the growing importance of technology in a revolutionised work
environment.

• The pandemic caused widespread changes to the way people work, and companies are increasingly dependent on technology to manage their workforce.
– HR technology companies raised approximately $2.2 billion of private investment in YTD June 2023.(1)

• Despite current market uncertainty, ongoing competition for qualified workers has amplified the importance of employee experience and shifted power dynamics between workers
and employers.
– Demand for solutions that address the needs of a remote workforce, improve hiring and training efficiency, and increase retention has fueled increasing investment and created
new categories in HCM technology.

• Emergence of innovative point solutions that address critical challenges has created a fragmented market that is ripe for consolidation.
– YTD June 2023 M&A volumes remain nearly on track to match 2022, with 106 announced transactions.(1)

HCM Technology Venture Capital and Growth Equity HCM Technology Mergers and Acquisitions

Deal Count
($Bn) Capital Invested Deal Count
235
1,111
963 211 212
899
820
$13.3
$11.4 142
726 127
363 106
$5.1
$4.2 $4.5
$2.2

2019 2020 2021 2022 YTD 2023 2019 2020 2021 2022 YTD 2023
(1)

(1) YTD as of 6/30/2023.

Source: Pitchbook. Indicates Annualized Figures

26
The Future of Work Is Driving Investment in HCM Tech
Employers expect to increase investments in HCM software to improve retention and productivity across their remote workforce.

1 The Future of Work is Remote 2 Declining Workforce Collaboration and Loyalty

Five Days per Week

20%+ remote workers believe

Four Days per Week flexible arrangements create

Three days per week

75% multiple working obstacles,
including declining collaboration.(1)

More than 48 million employees quit

Two Days per Week their job voluntarily in 2022.(2)
As employees approach multiple 39% of all workers work exclusively
One Day per Week
years of remote work, more than at home or work hybrid.(3)
75% want to continue working
I Would Not Want to Work Remotely remotely 2+ days per week.(1)

Companies Are Investing in Technology To Support

3 Growing Importance of Skilled Talent 4 Connectivity and Increase Retention
% of Companies Planning to Increase Investment

Improve Talent Progression and Promotion Processes Employees Intending Employees Intending to Being omni-
to Leave Stay connected
48% 59% of organisations expect accounts for
skills gaps in the local labour 46% 42% 59% of
Offer Higher Wages market to be the leading someone’s
barrier to business 18% intention to
35%
transformation.(4) 6%
stay with a
company.(5)
Better Articulate Business Purpose and Impact Productive Productive Productive Productive
24% Anywhere Nowhere Anywhere Nowhere

(1) McKinsey American Opportunity Survey, 23 June 2022. (2) CNBC, 5 January 2023. (3) Statista, US Adults Working From Home (4) World Economic Forum, Future of Jobs Survey, April 30, 2023.
Habits 2022, 6 June 2023. (5) Accenture Future of Work Study, November 29, 2022.

27
HCM Private Company Funding Leaders
Other Mega Funding Leaders
Equity Raised to Date: Q2‘23 Movers

>$500m

2022 and 2023 Acquired(1)

$200M–$500m

65+ companies raised

$100m+

$100M–$200m 200+ companies

raised $25m+

$50M–$100m

$25M–$50m

Note: Equity raised to date as of 30 June 2023.

Sources: Pitchbook, CB Insights, company filings, company websites, press releases.
(1) Based on transaction announced date.

28
HCM Venture Capital and Growth Equity Deal Dashboard – 2023

HCM Venture Capital and Growth Equity Activity HCM Venture Capital and Growth Equity Transactions
($bn) ($m)

Capital Invested Deal Count

Selected Amt. Equity
Date Company Subsector
Investor(s) Invested

Jun 14 Hiring Tools $17

1,111

963 June 1 Recruiting $38

899
820 $13.3
726 May 18 Contingent Labor $60

$11.4
May 3 Recruiting $25

363 Employee
May 2 $70
Engagement

Compensation &
Apr 11 $28
Benefits
$5.1
$4.2 $4.5
Mar 13 HRIS $500

$2.2 Employee
Mar 9 $80
Engagement

Feb 22 Payroll $40

(1)
2019 2020 2021 2022 YTD 2023 Hiring Tools &
Jan 26 $49
Marketplaces

Source: Pitchbook.
(1) YTD as of 30 June 2023. Indicates Annualized Figures Jan 25 Contingent Labor $100

29
HCM M&A Deal Dashboard – 2023

HCM M&A Activity HCM M&A Transactions

($M)

Deal Count
Date Target Buyer Subsector Enterprise Value

235 Jun 6 Employee Feedback N/A

211 212
May 31 Hiring Tools $52

Compensation &
May 16 ~$1,400
Benefits

May 9 Hiring Tools $375

142
127
Apr 26 Learning N/A

106
Apr 4 Onboarding N/A

Performance &
Mar 30 N/A
Succession

Mar 8 Onboarding $17

Feb 28 Payroll N/A

(1)
2019 2020 2021 2022 YTD 2023
Jan 31 HRIS ~$57

Source: Pitchbook.
(1) YTD as of 30 June 2023. Indicates Annualized Figures Jan 31 Talent Acquisition N/A

30
HCM Technology Transaction Timeline
Sustained M&A and capital markets activity has accelerated in the past several years with continued momentum in 2023.

January 28, 2021 June 28, 2021 September 14, 2021 March 9, 2022 May 6, 2022 October 25, 2022 January 25, 2023 May 8, 2023

acquired acquired acquired acquired Investment in acquired Series D led by Investment in

August 3, 2021 September 1, 2021 January 20, 2022 March 24, 2022 October 19, 2022 November 1, 2022 February 10, 2023

investment in acquired Financing investment in acquired acquired acquired

2021 2022 2023

May 5, 2021 August 4, 2021 November 18, 2021 January 21, 2022 March 15, 2022 June 2, 2022 March 13, 2023 June 7, 2023

acquired acquired acquired investment in investment in acquired Series E led by acquired

June 30, 2021 August 13, 2021 January 4, 2022 February 24, 2022 April 5, 2022 October 25, 2022 May 9, 2023

IPO acquired acquired acquired acquired acquired acquired

31
Recent Highlighted Transactions
Maguar Capital’s Investment in Hrworks | Announced 8 May 2023

Hrworks Profile:
 Developer of integrated human resource software serving small and medium-sized companies.  Founded 1998
 The company provides time management, travel expenses, personnel management, recruiting, corporate benefits,  Freiburg, Germany
personnel administration, and preparatory payroll accounting for all users - from the executive board to the management  Transaction valuation of $253m
Investment in
to the workforce.
 The funds provide additional capital for add-on transactions and a wider range of organic growth initiatives.

Sapphire Venture’s Series D Investment in Simpplr | Announced 2 May 2023

Simpplr Profile:
 Developer of an employee experience platform designed to simplify employee communication.  Founded 2014
 The company's software helps companies to connect their workforce by streamlining internal communications and  Redwood City, California
forging employee connections and it features the ability to create virtual headquarter and company newsroom, enabling  Transaction valuation of $550m
Series D investment in
companies to align and engage their entire workforce across the enterprise.
 The funds will be used toward growing the company's workforce and supporting ongoing product R&D.

Greenoaks Capital’s Series E Investment in Rippling | Announced 13 March 2023

Rippling Profile:
 Founded 2012
 Provider of an employee management platform intended to help eliminate the administrative work of running a company.
 San Francisco, California
 The company's platform helps to manage employee data and operations including onboarding, offboarding, payrolls, tax
 Transaction valuation of $11.75bn
Series E investment in forms, email accounts, and keycard access, enabling companies to onboard new employees seamlessly.
 The financing will support the company’s continued growth and shore up the balance sheet after the SVB collapse.

General Atlantic’s Series D Investment in Jobber | Announced 25 January 2023

Jobber Profile:
 Developer of job tracking and customer management software designed to manage home service companies.  Founded 2011
 The company sells its solutions on a subscription basis, typically through annual contracts with employers.  Edmonton, Alberta
Series D investment in
 The financing will support the company’s continued growth through investments in R&D, sales and marketing, and new
customer acquisition.

Sources: Pitchbook, 451 Research.

32
Most Active Selected Public HCM Consolidators
# Investments
Company (Since 1 Jan. 2019) Selected Targets

14
(LSE:SGE) 2023 2022 2022 2022 2022 2022 2021 2021

8
2021 2021 2021 2021 2020 2019 2019
(NYSE:CDAY)

8
(NASDAQ:INTU) 2021 2021 2020 2020 2019 2019

5
(NASDAQ:WDAY) 2021 2021 2021 2019

4
2022 2021 2020 2020
(NASDAQ:PCTY)

4
(NYSE:SMAR)
2022 2020 2019 2019

4
2021 2021 2021 2019
(NYSE:FVRR)

2
(NASDAQ:ADP) 2023 2021

Sources: Pitchbook, 451 Research.

33
Most Active PE-Backed HCM Consolidators
Rationales for buyers have included geographic expansion, product portfolio expansion, and technology advancements.

# Investments
Company Sponsor (Since 1 Jan. 2017) Targets

11
2022 2022 2021 2021 2020 2019 2019

11
2023 2022 2022 2022 2022 2021 2021

9
2022 2022 2022 2021 2020 2020 2019

8
2022 2021 2021 2020 2020 2019 2019

7
2021 2020 2020 2020 2019 2018 2017

7
2022 2022 2020 2020 2020 2019 2018

7
2022 2022 2022 2020 2020 2019 2018

4
2022 2021 2021 2020

Sources: Pitchbook, 451 Research.

34
Most Active Financial Sponsors
High investor activity of platform acquisitions, add-ons, and financings as investors with experience continue to double down.
# Investments
Sponsor (Since 1 Jan. 2017) Targets

29
2023 2023 2023 2023 2022 2022 2022

18
2022 2022 2022 2021 2021 2021 2021

15
2023 2023 2022 2022 2022 2022 2021

14
2023 2022 2022 2022 2021 2021 2021

14
2023 2022 2021 2020 2020 2020 2020

12
2023 2022 2022 2021 2020 2020 2020

12
2023 2022 2022 2022 2022 2022 2021

12
2023 2023 2022 2022 2021 2021 2021

Other Active HCM Tech Investors

Sources: Pitchbook, 451 Research.

35
HCM Technology Valuation Environment
Publicly Listed Comparables Transaction Comparables

Talent Acquisition
Core HR HCM Suite Talent Management HCM
Marketplaces

Illustrative targets
Implied Valuation Levels

2.1x 7.7x 4.7x 3.7x 5.9x

EV/Revenue 2023E EV/Revenue 2023E EV/Revenue 2023E EV/Revenue 2023E EV/Revenue(1)

11.8x 23.5x 14.7x 6.2x 18.5x

EV/EBITDA 2023E EV/EBITDA 2023E EV/EBITDA 2023E EV/EBITDA 2023E EV/EBITDA(1)

(1) Reflects median valuation multiples of selected precedent transactions from 1 Jan. 2017 through 30 June 2023.
Source: S&P Capital IQ; Trading data as of 30 June 2023.

36
Comparable Public Company Benchmarking
EV/2023E Revenue Multiple
Talent Acquisition Marketplaces Core HR HCM Suite Talent Management
10.6x

8.8x
7.9x 7.7x 7.7x 7.5x 7.7x 7.9x
7.1x
6.1x
5.0x 5.0x 4.7x 4.7x 4.7x
Median: 2.1x 3.7x
3.1x
2.6x 2.7x
2.1x 2.0x 1.9x 1.7x 1.4x 1.3x

2023E–2024E Revenue Growth

Talent Acquisition Marketplaces Core HR HCM Suite Talent Management

24.8%

20.9% 21.0%
19.0%
16.9% Median: 7.3% 17.1%
15.3% 15.6% 15.6% 14.3%
12.1%
8.9% 8.4% 8.4% 8.4%
7.4% 7.3% 6.4% 6.4%
5.1% 4.4% 5.2%
4.1% 3.5% 3.9%

Source: S&P Capital IQ; Trading data as of 30 June 2023.

37
Comparable Public Company Benchmarking (cont.)
EV/2023E EBITDA Multiple
Talent Acquisition Marketplaces Median: 11.8x Core HR HCM Suite Talent Management

29.0x 30.0x
28.4x
25.2x 24.5x 23.5x
22.5x
18.1x 18.4x 14.7x
17.3x 16.3x
15.6x 14.7x
14.4x 13.4x
9.9x 10.2x 8.4x 10.8x 6.2x
6.2x 6.2x

NM NM

2023E EBITDA Margin

Talent Acquisition Marketplaces Core HR HCM Suite Talent Management

48.3%
45.6% 44.5%
41.9%
39.1% 32.2%
Median: 22.7% 27.7%
32.2%
14.4%
31.2% 32.1%
27.2% 27.7%
25.9% 25.1% 25.4% 24.7%
23.0% 22.4% 21.2%
14.8% 14.9%
8.0% 7.7%
5.8%

Source: S&P Capital IQ; Trading data as of 30 June 2023.

Note: NM defined as EBITDA multiple <0x or >50x.

38
 Public HCM Valuations are Minimally Correlated to Revenue Growth
12.0x
3.9x 6.8x
Median EV/ Median EV/
Paycom
Revenue Revenue

10.0x 6.4% 18.1%

Median Median
Revenue Intuit Revenue
Growth Growth

Oracle Paylocity
8.0x Paychex Workday
Ceridian
SEEK
EV/2023E Revenue

Docebo

6.0x

ADP Smartsheet
Sage SAP

4.0x

First Advantage

IBM ZipRecruiter

Fiverr
Recruit Hireright
2.0x Upwork
DHI Group
Learning Technologies

0.0x
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Source: S&P Capital IQ as of 30 June 2023.

2023E – 2024E Revenue Growth
R-Squared = 0.20.

39
 Public HCM Valuations Highly Correlated to EBITDA Margin + Revenue Growth
12.0x

2.6x 7.6x
Median EV/ Paycom
Median EV/
Revenue Revenue

10.0x
27.6% 50.9%
Median Rule of Median Rule of
Intuit
40 40

Oracle
8.0x Paychex Paylocity Workday
Ceridian

SEEK
EV/2023E Revenue

Docebo

6.0x

ADP
Smartsheet
Sage SAP

4.0x

First Advantage

IBM ZipRecruiter

Fiverr
Hireright Recruit
2.0x Upwork
Learning Technologies

DHI Group

0.0x
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%
Source: S&P Capital IQ as of 30 June 2023. 2023E EBITDA Margin + 2023E – 2024E Revenue Growth
R-Squared = 0.53.

40
Precedent Transactions
LTM Rev
Announced Date Acquirer Target Description EV ($m) ($m) EV/LTM Rev

Developer of cloud-based payroll, human resources and benefits software

7/6/23 NA NA NA
products intended to serve enterprises.

Developer of a real-time employee feedback mobile and web app designed

6/6/23 NA NA NA
to help employees get better faster.

Provides talent attraction, engagement, and acquisition management SaaS

31/5/23 $52 N/A N/A
and related mobile applications.

Provides HR-related employee engagement, benefits management, and

16/5/23 ~$1,400 N/A N/A
team collaboration SaaS and related mobile applications.

Provides AI-based human resource hiring SaaS and related APIs for
9/5/23 $375 N/A N/A
businesses globally.

Provides time management, travel expenses, personnel management,

9/5/23 $253 NA NA
recruiting, and corporate benefits.

26/4/23 Provides people learning and development SaaS. NA NA NA

Provides human performance improvement, training, and workforce

30/3/23 NA NA NA
management SaaS to businesses globally.

Provides pre- and post-employment screening, clinical records, and social

8/3/23 $16.6 $33.4 0.5x
media and background check SaaS.

Provider of enterprise resource planning services intended to serve

2/3/23 NA NA NA
medium-sized to large temporary staffing providers.

Operator of an employee engagement platform intended to improve the

22/2/23 NA NA NA
employee experience.

Provides payroll and production accounting SaaS and related mobile

10/2/23 NA NA NA
application for businesses in the entertainment sector in the US.

Sources: PitchBook, 451 Research, S&P Capital IQ as of 30 June 2023.

41
Precedent Transactions (cont.)
LTM Rev EV/LTM
Announced Date Acquirer Target Description EV ($m) ($m) Rev

Provides an HR cloud-based platform that offers analytics, people

31/1/23 $57.6 $3.6 15.9x
management, and automation.

Developer of a software platform designed to help businesses in payroll

9/1/23 NA NA NA
management.

7/12/22 Provides AI-based executive search and recruiting SaaS to businesses. NA NA NA

Provides employee check-in and safety alert monitoring SaaS and

1/12/22 NA NA NA
related mobile applications for businesses.

Provides workforce management SaaS, APIs, and related mobile

22/11/22 NA NA NA
applications for businesses in Europe.

Provides workforce compensation management SaaS for businesses in

15/11/22 NA NA NA
the US.

Provides AI-based strategic workforce planning SaaS to businesses in

3/11/22 NA NA NA
the UK.

Provides corporate benefits administration and analytics SaaS for

1/11/22 587.7 254.9 2.3x
employers, insurance carriers, and brokers globally.

Provides talent intelligence SaaS and related APIs for businesses in the
25/10/22 180.0 35.0 5.1x
US.

Provides HR and payroll management SaaS, APIs, and related mobile

25/10/22 337.8 58.6 5.8x
application to businesses globally.

Developer of talent acquisition and employee engagement platform

19/10/22 NA NA NA
intended to help firms attract, engage, and retain suitable candidates.

Provides big data and AI-based recruitment management SaaS and

13/10/22 NA NA NA
related APIs to businesses globally.

Sources: PitchBook, 451 Research, S&P Capital IQ as of 30 June 2023.

42
Precedent Transactions (cont.)
LTM Rev EV/LTM
Announced Date Acquirer Target Description EV ($m) ($m) Rev

Provides HR benefits administration and enrollment SaaS and related

11/10/22 NA NA NA
mobile applications for businesses in the US.

Provides AI-based labour and workforce management SaaS for

4/10//22 NA NA NA
businesses in the US.

Provides talent acquisition SaaS, open APIs, and related mobile

30/8//22 44.8 10.4 4.3x
application for businesses.

Provides learning management SaaS, open-source based APIs, and

17/8/22 NA NA NA
related mobile application for businesses

Developer of a cloud-based experience management platform intended

15/8/22 NA NA NA
for employees and customer reviews.

Provides HR and talent management SaaS and related APIs for

10/8/22 110.0 29.7 3.7x
businesses.

9/8/22 Provides people management SaaS for businesses globally. NA NA NA

2/8/22 Provides recruitment SaaS for the HR department in enterprises. NA NA NA

Provides casting and auditioning SaaS for businesses in the

19/7/22 NA NA NA
entertainment industry globally.

Provides employee listening and management SaaS intended to provide

15/7/22 NA NA NA
insight into the feedback and ideas of employees.

Provides cloud computing and AI-enabled recruitment management,

15/7/22 NA NA NA
candidate sourcing, and matching.

Developer of business management software focused on growing

12/7/22 NA NA NA
companies in the green industry.

Sources: PitchBook, 451 Research, S&P Capital IQ as of 30 June 2023.

43
Precedent Transactions (cont.)
LTM Rev EV/LTM
Announced Date Acquirer Target Description EV ($) ($m) Rev

Provides employees with scheduling, communication, and management

7/7/22 NA NA NA
SaaS, APIs, and related mobile applications for businesses.

Provides digital pay slips management SaaS and related open APIs for
1/7/22 NA NA NA
businesses in the UK.

Leading cloud-based workforce management solution in the physical

23/6/22 NA NA NA
security industry.

Provides lone workers protection SaaS, related mobile app, and wearable
14/6/22 26.7 NA NA
GPS tracking and panic alarm system for businesses.

Provides HR recruitment management SaaS, APIs, and related mobile

14/6/22 124.1 NA NA
apps for Europe.

Provides AI-based learning, talent, and workforce management SaaS,

13/6/22 200.0 120.0 1.7x
APIs, and related mobile apps globally.

6/5/22 Developer of cloud-based talent-acquisition software. 3,000.0 NA NA

12/4/22 Cloud-based compensation management software. NA NA NA

11/4/22 Provider of employer compliance management solutions. NA NA NA

31/1/22 US-based provider of digital workforce credentialing. 200.0 13.3 15.0x

Developer of a digital learning software designed to help organisations

3/1/22 750.0 NA NA
instill knowledge around critical topics.

Sources: PitchBook, 451 Research, S&P Capital IQ as of 30 June 2023.

44
04 SELECTED HCM TECHNOLOGY DEALS FROM
HOULIHAN LOKEY
Houlihan Lokey Transaction Case Study: Maguar
Client Profile

Maguar Capital Management (Maguar) is a private equity firm based in Munich, Germany. The firm seeks to
invest in small-cap companies operating in the B2B software sector, primarily in the DACH region.

Our Role

Houlihan Lokey acted as the exclusive financial advisor to Maguar Capital and provided debt advice on all
Continuation Fund I

has acquired commercial aspects of the financing transaction. Following a comprehensive lender selection process, this
advice secured a highly attractive and flexible financing package to support the company’s future growth
strategy.

Transaction Snapshot
Financing Advisor
Maguar Capital, a leading B2B software investor in the DACH region, has sold its portfolio company HRworks
Holding GmbH, a rapidly growing human capital management (HCM) software provider, to a newly
May 2023 established continuation vehicle managed by Maguar. The successor fund, Maguar Fund 2, as well as the
management team of the company, intend to invest alongside the vehicle.

46
Houlihan Lokey Transaction Case Study: Verb
Client Profile

Verb is a behavioural-science-based microlearning platform that’s built to easily upskill and develop
managers and their frontline teams. Verb has a library of 100+ hours of proprietary, bite-sized soft-skills
content that addresses a variety of talent development needs.

Our Role
has been acquired by
Houlihan Lokey served as the exclusive financial advisor to Verb. This transaction highlights the team’s
expertise and continued success in the professional learning sector, marking the team’s 11th transaction since
the beginning of 2021.

Transaction Snapshot
Sellside Advisor
Verb, a people development platform incorporating behavioural science and proprietary microlearning
content to create best-in-class workplace training, has been acquired by Paycor. Paycor plans to fully
April 2023 integrate Verb into its HCM platform and accelerate the development of Paycor Paths, a new product
designed to help organisations inspire positive and sustainable behavioural change within their frontline
leaders through a series of personalised development journeys.

47
Houlihan Lokey Transaction Case Study: Talos360
Client Profile

Talos360, headquartered in Warrington, is one of the fastest-growing HR technology providers in the UK. Its
proprietary recruitment and engagement technology helps businesses better attract, recruit, and retain talent,
and it is a trusted partner to more than 700 businesses. Talos360 has become a market leader in SaaS talent
solutions and also built a reputation as a people-first business through its commitment to supporting
employees. The company currently employs more than 120 people.
has received a minority
investment from
Buyer Profile

LDC is a private equity firm with a strong heritage of supporting the growth of HR SaaS businesses. It has a
portfolio of 90 businesses throughout the UK., across a broad range of sectors, and has a nationwide network
of regional offices to provide a local presence to the businesses and communities it supports.
Sellside Advisor

October 2022 Our Role

Houlihan Lokey both originated and acted as the lead advisor on the transaction, providing corporate finance
advice to Talos360.

Transaction Snapshot

Talos360, an award-winning provider of HCM solutions, has chosen to partner with leading middle-market
private equity firm LDC to support the next stage of its growth journey.

48
Houlihan Lokey Transaction Case Study: Netigate
Client Profile

Netigate provides a cloud-based experience management platform that allows customers to collect, analyse,
and take strategic action on insights gathered from its two most valuable assets: its customers and
employees. As a fast-growing SaaS company, Netigate supports 1,500+ global customers from its offices in
Germany, Sweden, Norway, and Poland.

Buyer Profile
has been acquired by

GRO Capital is a leading Northern European private equity fund with an exclusive focus on mature B2B
software and tech-enabled companies with strong growth prospects. GRO Capital serves as an active owner
developing portfolio companies with a view to create long-term value. The partners behind GRO Capital have
been investors in more than 25 technology- and software-related companies, and GRO Capital has
Sellside Advisor approximately €1 billion in AUM.

August 2022 Our Role

Houlihan Lokey served as the exclusive financial advisor to the selling shareholders of Netigate and assisted in
marketing, structuring, and negotiating the transaction on behalf of the company.

Transaction Snapshot

Netigate has received a secondary investment from GRO Capital to fuel growth and accelerate the build-out
of a leading experience management platform. Through this investment, GRO Capital has become the
majority shareholder in Netigate.
This transaction further highlights Houlihan Lokey’s deep sector expertise in advising Nordic software
businesses, particularly those within the customer and employee experience space.

49
Houlihan Lokey Transaction Case Study: Maguar
Client Profile

Maguar Capital Management (Maguar) is a private equity firm based in Munich, Germany. The firm seeks to
invest in small-cap companies operating in the B2B software sector, primarily in the DACH region.

Target Profile

Headquartered in Amsterdam, Effectory provides an integrated approach to understanding the complete

employee experience while its SaaS offering leads to valuable insights and guidance.
has acquired

Our Role

Houlihan Lokey served as the exclusive financial advisor to Maguar and provided debt advice on all
Financing Advisor
commercial aspects of financing the acquisition.

Transaction Snapshot
August 2022
The partnership with Effectory’s founders and current management underpins Maguar’s strong commitment
to further supporting the company’s development and its vision of delivering tangible value throughout the
entire employee lifecycle. The new partnership aims to further accelerate strong growth, especially in the
DACH region.
Together with Maguar, an experienced sponsor in the software industry with a significant footprint and deep
expertise in the HR technology sector, Effectory plans to continue the platform’s success story and strengthen
its product offering. Maguar’s previous experience in the HR technology sector includes investments in
HRworks and Ingentis.

50
04 OVERVIEW OF HOULIHAN LOKEY’S GLOBAL
TECHNOLOGY GROUP
Houlihan Lokey Global Technology Group Positioning

LARGE-CAP TRANSACTION MIDDLE-MARKET/

EXPERTISE GROWTH SECTOR FOCUS

• CEO-level relationships with leading • Unique global access to venture capital,

tech companies private equity, and strategic investors

• Large senior team with unparalleled • Growth company focus

transaction experience
• Deep sector expertise and domain
• Broad network including Fortune knowledge
500 relationships
• Extensive capital markets access
• Highest-quality client service
• Late-stage private-through-public
• M&A advisory and capital-raising company orientation
expertise

52
How Houlihan Lokey Can Help
Our firm is extremely well-equipped to help our clients navigate uncertain times. We respond quickly to challenging situations and are
constantly helping clients to analyse, structure, negotiate, and execute the best possible solutions from both a strategic and a financial
perspective.

What We Offer
1 Mergers and Acquisitions
We are widely recognised as a leading M&A advisor and have longstanding relationships with
Capital Markets capital providers, including commercial banks and other senior credit providers, insurance funds,
Private Funds Advisory asset managers, and mezzanine fund investors. Few other investment banks maintain the breadth
Corporate
of relationships and capital markets intelligence that we do.
Finance Board Advisory Services
2 Company Advisory

Special Situations
We have the largest restructuring practice of any global investment bank. Since 1988, we have
Distressed M&A advised on more than 1,500 restructuring transactions (with aggregate debt claims in excess of
$3.0 trillion). We served as an advisor in 12 of the largest 15 bankruptcies from 2000 to 2022.
Financial Liability Management
Restructuring Creditor Advisory
3 Portfolio Valuation and Fund Advisory

Transaction Opinions
For five decades, we have established ourselves as one of the largest financial and valuation
Corporate Valuation Advisory Services advisory firms. Our transaction expertise and leadership in the field of valuation help inspire
Transaction Advisory Services confidence in the financial executives, boards of directors, special committees, investors, and
Financial and business owners we serve.
Valuation Real Estate Valuation and Advisory
Advisory Dispute Resolution Consulting

Why We’re Different


No. 1 for US and

Significant Experience

Senior-Level

Deep, Industry-Specific

Superior Work

Creativity, Imagination,
Tech M&A(1) With Financing Markets Commitment and Expertise Product/Technical Tenacity, and Positivity
Dedication Abilities
(1) Source: Refinitiv. Excludes accounting firms and brokers.

53
Disclaimer
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Houlihan Lokey gathers its data from sources it considers reliable; however, it does not guarantee the accuracy or completeness of the information provided within this
presentation. The material presented reflects information known to the authors at the time this presentation was written, and this information is subject to change. Any
forward-looking information and statements contained herein are subject to various risks and uncertainties, many of which are difficult to predict, that could cause
actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. In addition,
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related services to these companies. Like all Houlihan Lokey employees, the authors of this presentation receive compensation that is affected by overall firm
profitability.

54
CORPORATE FINANCE
FINANCIAL RESTRUCTURING
FINANCIAL AND VALUATION ADVISORY

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