It’s been a good year to be in the public markets and be an HR company. The average HR firm as demonstrated in this chart is up 42.5 % from the low of their stock price over the last 12 months.
I have included the salesforce.com multiple as it reflects a great benchmark on the Software as a Service Model.
The vendors in the HR space that are truly playing in this space (SaaS) include Taleo, Kenexa, Workstream (partial), Workbrain and ADP (Employease /Virtual Edge).
For advertising I have included the Washington Post, Yahoo, Google and Monster.
What is interesting is looking at traditional staffing firms versus some of the newer players like Kenexa, who both offer RPO (recruitment processing outsourcing) yet have widely different multiples.
I believe the hot market is reflective of two things:
1) The tightening of the labour market driving recruitment costs up as well as investment in current employees (more compensation, more benefits, more training).
2) The Merger and Acquisition Market. With a plethora of firms making deals, the value of HCM firms has significantly increased. In fact, look at some of the deal flow and multiples (thanks to Jeff Becker at JMP securities).
Note that the recent widely successful IPO of Salary.com has opened the door and minds for several of us in terms of valuing the market. Salary.com is one of the few players focusing exclusively on the Compensation and Performance space. With approximately $15M in revenue and $4M in losses in the last nine months alone, they proved to the market that you can raise money in an IPO and get a lofty evaluation. At over 10X sales, their evaluation is currently the largest in the HCM space. It is great for the folks of Salary.com, it is great for the HCM space. Job well done Kent Plunkett (CEO of Salary.com).
