How investors are stitching together new workforce platforms
Those of us actively tracking the revolutions that are taking place in global workforce management have started to notice a trend when it comes to dollars flowing into this market segment. Increasingly, investors are looking to pull together the offering of the future by combining assets that are available in the market today with innovative commercial models, technology, and sales approaches. Examples include:
- Time & Attendance + payment engine = Same Day Pay
- Payroll + HR Services + EOR + payment processing = Total Talent Compensation Platform
- Outsourcing + Gig Economy Platforms + EOR = Flexible Project Workforce Management
These workforce platforms are composed by creating a core business with standardised operating models for marketing, sales, delivery, and technology and then adding capability, volume and geographic reach through acquisitions. What’s appealing to investors is the recurring revenue intrinsic to these offerings, the ability to matrix across a variety of customer requirements and retain or grow client share, and the transformation that cloud and remote working bring to the concept of “geographic” segmentation. And, what’s important to companies and employees is that every engagement ends up in a payment, but in today’s flexible employment world that doesn’t necessarily mean payroll as we know it.
This approach creates demand
Because there is growing interest in this revolution there are many, many innovators in the market looking for the right pieces to their future workforce platform puzzle. That’s why founder-owners of fairly “old fashioned” businesses like payroll, time & attendance, HR consulting, contractor management are discovering that their companies are interesting potential investment opportunities for a variety of players, including trade buyers, private equity backed trade, and private equity themselves. That’s also why many founder-owners of disruptive start-ups are realising that they are focused on part of the puzzle and will need to acquire or be acquired to have a complete offering on their platforms.
Demand drives deals
Acresis is tracking increased deal volume and demand for businesses in this market, but not all businesses are valued the same and not all founders are prepared to gain maximum value. Our experience is that founders need the opportunity to look up, stare into the corner, and imagine their business from the perspective of these investors and game changers. They need advice and support to evaluate their current operation and financial results to shape them to optimise recurring revenue and other traits that will increase the value of their business. Founders of fast growth businesses need to be clever about their investment decisions, align with the right investors at the right time and partner with their ecosystem players in a more dynamic fashion.
These requirements and this demand driven market is why Acresis have created a three-part series to provide guidance to founder-owners in the HR-Payroll-workforce management marketplace. As experts in the HR and Payroll market, we are uniquely placed to see all sides of this exciting opportunity and provide insight and support to investors and founders alike. Parts 1 and 2 have been released and can be found on the links below.
Part 1 – How to Understand the Value of your Business – provides insight into the variety of factors that are in play when an HR/payroll business is being evaluated from a value perspective. We explain how these factors specifically relate to found-owned businesses and discuss what may make a specific business unique and sought after.
Part 2 – How to Position Your Business to Potential Buyers/Investors – focuses on the actions you can take to increase the value of your business to buyers/investor before you invite them to the table.
Part 3 – Best Practice to Optimise the Outcome of a Transaction – focuses on best practice behaviours in managing your business leading up to and during a transaction and identifies the activities that support a successful deal. (Coming soon)
We wrote these pieces to offer insight and support to founder-owners. We would love to get feedback
The author, Patricia Taylor is a Board advisor and member; Growth and Capital Strategist; B2B SaaS and Services Expert. She has over 20 years’ experience in leading organisations through high growth in fast changing markets from concept to profit to scale and has advised over ten founder-based businesses and four private equity firms in the past five years.
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