Who Should Taleo Acquire Next?
After reading speculation this week that Taleo is preparing for another acquisition, it got me thinking…“Who should they buy?”
The prospective acquisition options are all over the map. They could acquired another talent acquisition vendor to really expand their market share and leadership position. They could acquire another talent management suite provider. They could enter into new categories such as workforce planning or social collaboration. They could extend into new emergent “edge” technologies that surround the talent acquisition core.
Acquisitions are never easy. One must assess a company’s profitability or potential profitability. One must analyze how shareholders will response to the acquisition. One must complete significant due diligence in the technology and identify how it will fit into the acquirer product portfolio. The list goes on.
One could buy a company for the “now” which means it will likely be accretive and increase the acquiring company’s earning per share (EPS). These acquisitions tend to be favorable for the company’s share price because the price paid by the acquiring firm is lower than the boost the new acquisition will provide to the acquiring company’s EPS. The challenge is that their aren’t many company’s out there in our space that fit this bill and those that do typically have older technology that will require either retrofitting or sunsetting (such as what Taleo did with Vurv).
One could buy a company for the future. This means the company will likely be smaller and the technology less proven. In this scenario, the acquiree will often demand a price premium. The potential upside and market opportunity, though, could provide significant differentiation and innovation. This can be a riskier strategy since these acquisitions tend to be less favorable with shareholders since they do not generate immediate cash.
The last alternative is buying a distressed company where the assets or “pieces” are purchased at a fraction of what has been invested. These acquisitions tend to be cheap but often worthless at the end of the day because the technology and customers prove ultimately worthless.
If I was Taleo, I would chose Door #2, or look at acquiring some of the new emergent technology company’s out there. Jobs2Web comes to mind as a company with great momentum and a growing, market-accepted product In fact, the company was recently recognized as one of the fastest growing private companies by Inc. Magazine (#228 on the list to be exact). [Sidenote: Knowledge Infusion was also on the Inc 500/5000 list]. Of course, its easy for me to say this sitting from the sidelines without having to answer to shareholders.
With all of this said, Taleo is likely already staring their next acquisition in the face as they currently have a strategic investment in Worldwide Compensation (WWC) with the option to purchase the company outright in the near future. They did focus their last earnings call on how well the partnership with WWC was going. A signal?
Acquisitions are alway fun foder for folks like myself but I always caution customers to pay much attention because they can have many long-standing ramifications (both good and bad) to their client relationship.
If you were a Taleo customer, who would you like to see them buy next?
14 Comments Add your own
1. Victor | August 27th, 2009 at 11:08 am
What about HarQen’s product Voicescreener? I took a look at it the other day after a colleague told me about it and it seems like the most ideal candidate for the “edge” technologies you spoke about.
Otherwise, I see big things for Jive Software. I love what they are doing. They were my vote.
2. Peter | August 27th, 2009 at 11:29 am
To broaden their suite, I would envision a WFP tool, such as Vemo. WFP is a hot topic for clients now and these tools aren’t typically integrated with an ATS. The value this would add at the C-level is huge. It really places Talent Management at the heart of an organization’s overall business objectives and strategy.
Social recruiting is all the buzz, but Taleo is already working on a similar offering (see all of the marketing emails about Monarch being “Facebook easy”). I do like Jobs2Web, though.
One other thought would be a Learning Management tool, something that is missing from the Taleo TM Suite.
Interesting times….
3. Jason Corsello | August 28th, 2009 at 7:57 am
Thanks for the comments so far. If I missed any company’s please add them & explanation in the comments.
J
4. Ian Alexander | August 28th, 2009 at 10:43 am
I think the question should be: Who would Oracle want Taleo to buy?
5. Psychometric | August 29th, 2009 at 4:42 pm
What about an assessment player like SHL or PreVisor? Companies like these already have a number of integrations with Taleo. And guess what? they are profitable with very high gross margin. Something, I am sure Taleo aspires to eventually.
6. Pal of mine | August 30th, 2009 at 11:50 pm
Aha! Psychometric, you are on to something big time. I agree. But let me tell you, I think Taleo would aim higher in the assessment market. SHL and PreVisor are small potatoes and niche focused. The talent management consulting companies (hint: the ones with acronyms) would better round out their portfolio.
7. Psychometric | August 31st, 2009 at 8:42 am
DDI will never sell
8. Psychometric | August 31st, 2009 at 8:52 am
And another thought, (assuming Pal of Mine meant DDI), surely Taleo is going to want to buy Web Services type companies? Not highly consulting oriented countries. Over 50% of SHL and PreVisor revenues now run through integrations with ATS providers. All high margin product revenue that is already ‘passed through’ Taleo like platforms. Why buy a services business with an expensive consulting force? Finally, SHL is a global player across all job families, while I admit PreVisor is more high volume call center/customer service roles.
9. Pal of mine | September 1st, 2009 at 12:56 pm
Every company has a a price…. especially ones that have experienced a downturn in revenues, layoffs and lack the luxury of multi-year contracts.
10. SIM | September 8th, 2009 at 9:17 am
Just a quick question for Psychometric. Based on the fact that SHL and Previsor are privately held… where are your quotes regarding “revenue % through ATS providers” and “gross margin and profitability” coming from??
11. Psychometric | September 11th, 2009 at 11:14 am
Hi SIM, in response to your question, I have experience as a buyer of SHL and PreVisor services when installing an ATS. My knowledge was gathered through this due diligence process. We quickly discovered there are really only two real testing players integrated with Taleo: SHL and PreVisor. Compared to other assessment providers, they have a core competency in web services. As for gross margin, all on-line assessment companies have high gross margins. SHL’s numbers were there for all to see, as they were public until they went private in 2006 with an MBO backed by Hg Capital.
12. Pal of mine | September 11th, 2009 at 1:12 pm
Psychometric,
When you say “two real testing players integrated with Taleo,” do you mean app > app or data > app, or both?
13. Psychometric | September 14th, 2009 at 6:58 am
Pal of mine,
Both but increasingly App to App. PreVisor for example pioneered Webservices with HR XML protocols for assessment providers.
14. Pal of mine | September 14th, 2009 at 10:28 am
I’d be interested to see if a volume-focused player like PreVisor starts competing more in Sr. Exec + assessments.
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