KBS - Human Resource Management and Human Capital Management - Market Insight

STRATEGIC INTERESTS OF PRIVATE EQUITY AND INVESTMENT BUYERS IN THIS SECTOR One of the most compelling forces boosting M&A in 2025 involves private equity firms, which are attracted to HR’s recurring revenue models. HR SaaS firms with subscription income, or HR outsourcing companies with long term client contracts, offer the kind of steady cashflows PE firms look for. The ‘sticky customer bases’ in HR (e.g. payroll processing relationships or software deeply embedded in HR departments) reduce business risk. + BUY-AND-BUILD PLATFORM STRATEGIES The HR industry’s fragmentation plays into PE’s interests. Many PE firms acquire a platform company in a segment and then pursue other add-on acquisitions to build it out. Therefore, a large portion of HR sector deals are PE-driven add-ons. In early 2024, roughly 30% of HR and staffing transactions were add-ons by sponsor-backed companies continuing their roll-up strategy. PE groups are actively consolidating the market, buying smaller competitors or complementary tech to bolster their platforms for eventual resale at a higher valuation.

The global HR software market size was estimated at $16.43bn in 2023 and is expected to grow at a compound annual growth rate (CAGR) of 12.2% from 2024 to 2030.