There are many interesting dimensions to this acquisition.
First, CEB is a global provider of best-practices research and tools in the areas of Human Resources, IT, Sales and Marketing, Finance, and Legal. Its business has been stable but slow-growing, and the company has been looking for faster growing "data-driven" businesses.
Earlier this year CEB acquired Valtera, a mid-sized engagement tools and consulting firm. The goal of this acquisition was to deliver new assessment and consulting services to corporate HR departments, complementing the company's existing Corporate Leadership Council membership. The acquisition of SHL continues this strategy, as the company will now offer a range of assessments and assessment consulting to its global clients.
SHL is a company we have admired for many years. The company was built through the merger of SHL and Previsor, and is now the largest provider of employee assessments. These scientifically validated assessments (tests) help companies understand who is the "right talent" for a wide variety of positions. The assessment market is very large (well over $2 billion) and very fragmented, with hundreds of small assessment firms who specialize in niche job roles and positions. SHL has effectively outflanked many of these smaller providers by positioning itself as a "talent management" company, focused on helping organizations improve performance across all their positions.
SHL is also an innovative organization. The company delivers simulation-based assessments, mobile and off-line assessments, and is in the middle of rolling out its new Talent Analytics service which provides benchmarking data to organizations. The Talent Analytics service, which was likely a big reason CEB was interested, promises to help organizations benchmark their prospective (and existing) employees against other companies to understand where they have competitive talent gaps. This service falls into the category of "emerging BigData services," which could be sold as a seperate data offering in its own right.
In the HR market today, CEB sells a variety of services including best-practices research, engagement tools and services, education, and now assessments. The company's sales force calls on senior HR leaders and typically sells a "professional networking" solution which lets senior HR leaders learn from each other. By acquiring SHL, the company now has a much broader range of products, which bring it "down scale" in selling to mid-level recruiting managers and smaller companies.
This is a big acquisition for CEB. SHL alone is a growing, highly profitable $209 million company which generates more than $50M of EBITA, contributing much higher earnings per dollar of revenue than CEB does from its core business. Because of this earnings contribution, the company paid more than 3.3X revenue, which is significantly higher than CEB's multiple today. So for CEB, they acquired a faster-growing, more profitable business which is nearly 40% its size.
The owners of SHL, HgCapital and Veronis Suhler Stevenson, announced that the company was for sale, so we expect that there were multiple bidders. This is a very well run company, and we believe the integration of its business with CEB will help it grow. The plan today is to keep both brands in tact, since the SHL brand is far better known than CEB in the area of talent assessment and recruiting.
A BigData Play
These companies believe heavily in "BigData" to deliver predictive analytics. (Read more about BigData in HR.)
Let's face it, most talent decisions in companies are not very scientific and companies will pay a lot of money to get data-driven tools which help them hire, grow, and move people with more predictable results. CEB's acquisition of Valtera is intended to build a database of engagement data and likewise the company's acquisition of SHL is intended to leverage its database of assessment data for hiring and promotion decisions.
Other big players already play in this sandbox. LinkedIn holds one of the most useful BigData solutions for talent acquisition and capabilities, and the company is following a forced march to deliver more and more data services every year. SAP, through its acquisition of SuccessFactors, is focused heavily on building deeper talent data services and the company already delivers one of the world's leading talent analytics systems. IBM is investing heavily in BigData for HR tools and services, and we can expect Oracle to move in this direction as well. And we expect that nearly every other talent management vendor will start to leverage its customers' data and start to sell "data services" with its technology.
Look at what has happened to the CRM market. Salesforce now sells "Data.com" and Jigsaw to its customers as part of its focus on selling data coupled with its platform. Why wouldn't SAP, Oracle, Workday, ADP, and every other software provider offer benchmarking data from its customers along with it's systems? It's only a matter of time.
The world of HR products and services changes rapidly every day. Who would have guessed that a senior executive services company like Corporate Executive Board would start selling employee engagement and assessement tools? When you think about the financial leverage of selling data coupled with tools and services, it makes perfect sense.
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Josh Bersin writes on the ever-changing landscape of business-driven learning, HR and talent management.
His favorite topics include strategic talent management, creating high-impact learning organizations,
and how organizations drive business change and competitive advantage through talent strategy and technology.
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