The Employee Engagement Market – The Early Innings of Rapid Consolidation

Earlier this week, Clearsight announced its role advising Brand Integrity in its acquisition by Reward Gateway. This is an important deal because it further highlights several trends that we have been both preaching and witnessing over the last several years: first, a convergence across business models and second, convergence and consolidation across the fragmented employee engagement landscape.

There is also a strong trend toward integrating employee engagement and customer experience, but we will save that topic for another day. Brand Integrity is a unique business because of its ability to integrate its software with leading consulting services, creating an end-to-end solution that allows clients to achieve truly sustainable engagement and results. With Reward Gateway’s geographic footprint as well as with their depth of solutions across HR technology and rewards, the combined business will be a force to be reckoned with.

Stepping away from the Brand Integrity and Reward Gateway deal, it’s interesting to note other meaningful deals that have transpired in the same space just over the last 12 months. Clearly, private equity firms have taken notice in the market opportunity to acquire platforms to consolidate the market:

1. The merger of CultureIQ and CEB’s Workforce Surveys & Analytics division: this deal was supported by ParkerGale, a private equity firm.
2. An investment by Vista Equity Partners into YouEarnedIt, a firm focused on employee recognition and rewards.
3. BI Worldwide’s acquisition of Bunchball, an employee engagement firm focused on mitigating enterprise challenges through tech-enabled gamification.
4. An investment by NewSpring into Energage (formerly Workplace Dynamics), an employee engagement firm focused on surveys and culture building.
5. Comvest Partners’ acquisition of Engage2Excel, an employee recognition and rewards business.
6. An investment by Norwest Ventures into Glint, a company that leverages employee-provided survey data to provide insight into an organization’s health.

We believe that the pace of M&A across the employee engagement market will continue despite the market itself being highly fragmented: in fact, companies attacking employee engagement exclusively through software will become quickly commoditized. Additionally, we believe it’s just a matter of time until we see even tighter integration into other HR-focused platforms such as HCM software, training and development, and consulting. Lastly, the visible link between employee engagement and customer experience is becoming indelible and Clearsight looks forward to watching how firms like Medallia, Qualtrics, and similar experience-centric organizations take on the engagement space.