Cornerstone OnDemand announced Monday that it is acquiring Saba from Vector Capital in a cash and stock transaction worth approximately $1.395 billion. In a call with press and analysts announcing the deal, Cornerstone founder and CEO Adam Miller said the combined company would have over $800 million in annual recurring revenue with 7,000+ clients.
Vector has reportedly had Saba up for sale since at least September of last year for a reported asking price of $1.2 billion dollars.
Miller claimed the acquisition of Saba would allow Cornerstone to substantially increase their client base, improve cash flow (even after debt payments to finance the transaction), and accelerate research and development efforts. Miller also praised the Saba team for turning around the organization. He specifically called out Saba CEO Phil Saunders, who will be joining Cornerstone as their chief operating officer after the transaction closes, currently estimated for Q2 of 2020.
This is the second large HR technology M&A deal of the last few days. Last week, Kronos and Ultimate Software announced they were merging. Collectively, the two mega-deals affect tens of thousands of clients, largely in the HR and learning communities. Albert Pang from Apps Run The World tweeted out a startling comparison in the before and after picture of cloud HCM applications.
Cloud HCM applications saw two blockbuster deals in a matter of days, reshaping outlook of the $17B market. #HCMTop500 #CloudTop500 @CornerstoneInc + @sabasoftware and @UltimateHCM + @KronosInc https://t.co/C01YHIRLt7 pic.twitter.com/eB4qtjRr8X
— Albert Pang (@APPSRUNTHEWORLD) February 25, 2020
Cornerstone and Saba share similar histories, with both companies founded on learning management before eventually expanding to full talent management suites. The two companies were the only strategic leaders in Fosway’s recently released 9-grid for learning with a similar close pairing in the talent management category. The combined companies will be the market leader in corporate learning and will have some of the most widely used talent management software.
Saba was founded in 1997 and went public in 2002. Vector Capital acquired Saba in early 2015 for approximately $400 million, taking the company private after a tumultuous period of time where the company was delisted from the Nasdaq and went through revenue restatements and paid SEC fines related to overstating revenue for nearly five years. During its private equity ownership, Saba acquired Halogen Software in 2017 and Lumesse in 2018.
More analysis of the recent rush of HR technology consolidation will be coming over the next few days.