August 2024 update on investments, M&A deals, and profit strategies to capitalize for screening and verifications workforce compliance industry.
Placement funding and financing Investments Deals
- More than $1 Trillion to be deployed by USA private credit and equity investors; tech innovation and platform consolidation to continue at a faster pace in Q3 and Q4 than previous 6 quarters
- More than 20 USA acquisitions on average per year since 2020 for workforce compliance
- Category leaders command 2x the profitability of the average services provider
- Deal trending categories include: AI, Intelligent Automation, Embedded Experience In-the-Flow-of-Work, Post-hire Compliance, continuous Compliance, Professional Due Diligence, Verification including security Access Management Identity Management, Employment and Credentialing and Licensing Verification
Profit Considerations
- Valuations at all-time high for Workforce Compliance in 2021. First half of the 2024 year revealed declining valuations for service providers, with widening valuations for software splitting firms into either below historical average or above average premium valuation
- Increase in competition from non-traditional industry Vertical SaaS solutions as well as global leaders
- 30% YoY revenue growth for niche industry vertical specialists (versus single digit growth for generalists)
- Nearly 1 in 5 organizations conducted post-hire background checks in 2023
Industry Landscape Summary. While there are hundreds of local specialists, the market is dominated by a few large global leaders, with emerging modern leaders backed by investment sponsors.
- Private Bootstrapped Industry Landscape. The market for USA private (excluding globals, enterprises, and investor backed) workforce compliance services is estimated at $1B in annual revenues based on market share analysis of the top 250 providers.
- Investor Backed Industry Landscape. The USA workforce compliance for screening and verification covers 84 investor sponsored companies in various segments, with an average revenue size of $72M and total revenue size of $4,032M. The average age of companies is 24 years old, with an average employee growth rate of 0.08% (not growing via adding employees as focused on tech-enablement and automation) and a total employee count of 96,715. The estimated total funding amount is $820M since 2020 to investor backed workforce compliance.
- The global workforce compliance market beyond the USA screening & verifications market (including payroll, benefits, and other workforce compliance) is valued at more than $100 billion, with niche and enterprise solutions growing at double digits.
Investment Trends. Billions in capital deployed to Workforce Compliance Verifications and post-hire workforce technology investments. Majority of the recent investments focused on either platforms, vertical niche industry specific SaaS, or enterprise solutions. More financing and capital options with an abundance of capital available from Private Credit and Private Equity. More deal types and options than ever before…
Deal Themes include industry consolidation into platforms (“Platformization”) and Verticalization (Vertical SaaS Industry Solutions).
Deal Summary Snapshot.