It’s merger-and-acquisition season in the work technology sector. The whole industry has been infused with investment levels of historic proportions over the past four years. With increasing interest rates and nervous investors, it’s no surprise to see venture capitalists try to get a return on their dollars or reallocate their portfolios.
But you didn’t come here to read the musings of what the actions of billion-dollar investment funds might mean to the market. Instead, let’s focus on one of the latest deals that might have confused a few folks.
Employ Acquires Lever
Early last month, Employ acquired Lever. For most people, a private-equity firm acquiring an ATS and CRM provider is not that big of news. Even client mostly just want the assurance of continuity and continued support.
But Lever wasn’t acquired by any private-equity firm. They were acquired by K1 Investment Management and rolled into a relatively new company called Employ, which already had two other well-known ATS providers (Jobvite and JazzHR). They had also acquired RPO provider NXTThing in 2021.
Most acquisitions go the way of what Cornerstone is doing in learning. When they bought Saba and EdCast, they intended to integrate the companies and technologies. It’s a multi-year process and can be difficult for client retention, but it can also strengthen and simplify operations when done well.
Why would a company with two prominent ATS providers add a third one, while not even remotely suggesting that they would be combined in any way?
What’s Confusing About This
Most work tech transactions just don’t work this way. But first, let’s go back to 2018, practically ancient history at this point. It looked like K1’s acquisition of Jobvite was going to look the same as most product rollups. From 2018 to 2020, K1 acquired Canvas, Rolepoint, Talemetry, Predictive Partner, and Talentegy — all announced as Jobvite additions.
Like many private-equity firms, they found a central point to build a product with and hoped that when they took it public or sold it to another firm, the sum of sale would be greater than the price of its parts.
Then they bought JazzHR and NXXThing and told the world they were doing something different. JazzHR and NXXThing wouldn’t be integrated into Jobvite or sold together. They would remain separate brands — and indeed, that has been the case.
That change in direction, as well as the novelty of the approach, was probably confusing to market observers. The lack of acquisitions in the last 16 months after a flurry of activity since 2020 probably didn’t help.
In Defense of a House of Brands
In marketing, what Employ is doing is creating a pluralistic (or, house of brands) brand architecture. One of the most prominent examples in work tech is the Learning Technologies Group, which has 13 brands under its umbrella.
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While this approach isn’t used very frequently in B2B software, it is used quite a bit on the consumer side. Procter & Gamble, one of the largest conglomerates in the world, doesn’t just have every type of consumer packaged good but it also has a number of competing products — four brands of diapers, half a dozen skincare brands, seven laundry detergents, and more.
For the conglomerate, the differentiated brands let them offer specialized solutions to consumers to ultimately expand their share of wallet in the industry. Tide can offer a mainstream laundry detergent while Ariel can offer a more Earth-friendly solution. Most people will never know that their parent company is the same.
Buyers benefit because a conglomerate can centralize common services and leverage existing relationships, ostensibly saving money and delivering a more consistent experience. Delivering Tide to thousands of stores is a logistical challenge. Delivering Tide, Gain, Cheer, and Era is marginally more complex. Common back office staff and supplier relationships make it easier and cheaper to gain access to needed supplies.
Why Different Could Be Better
Of course, Lever isn’t a laundry detergent (but Lever 2000 is a Unilever-brand soap). But a pluralistic brand structure is typically less disruptive for end-users than one which requires every piece of technology to share the same brand and technology base.
If JazzHR — one of the best value SMB ATSs out there — wasn’t Jobvite’d to oblivion after more than a year, it’s worth taking Employ at their word. Lever customers can look at it the same way that they would any other behind-the-scenes acquisition, and it’s in Employ’s best interest to create a seamless, worry-free experience for clients. Nobody needs to go shopping for a new solution unless they actually need one.
Going forward, Employ brands will likely compete with themselves in some deals because the differences between ATS and CRM brands aren’t always very clear. That’s something they’ll continue to work on as they evolve their individual products. But outside of industry insiders, talent acquisition technology leaders should be evaluating Jobvite, JazzHR, and Lever exactly like they do today — separate products with different functionalities for different kinds of organizations.