Cornerstone Goes Private: This Is All About Growth

This week two prominent HR Tech vendors were acquired by private equity firms. CornerstoneOnDemand, the leading LMS company, announced they will be acquired by a PE firm Clearlake for $5.2 Billion, a 31% premium to the stock price at the time. In the same week Medallia, one of the leaders in employee voice and customer experience, announced they will be acquired by a PE firm for $6.4 Billion, a 20% premium at the time.

What’s going on? This is all about growth.

As I discussed in the article HR Tech Is White Hot: Is Every Vendor A Unicorn? the market for HR and learning vendors is explosive. Companies are heavily investing in recruiting tools, employee experience tools, and all kinds of upskilling, training, and organizational development solutions. And the delayed end of the Pandemic is making the market hotter than ever.

But there’s an even bigger trend taking place: the high-speed replacement of the last decade’s generation of HR and workplace technology with a whole new set of tools. So vendors who have not “caught the wave” for growth have lost their premium in the market, and they can be acquired and consolidated for growth.

Let’s talk about Cornerstone.

CornerstoneOnDemand is a pretty amazing company. It is the largest learning technology company by far ($214M in revenue this quarter at a 16.3% growth rate), and now has more than 75 million licensed users, a global footprint, and some of the leading learning technology in the world. The core LMS market, which is what Cornerstone (and Saba) really pioneered, is a $4 Billion business alone, and Cornerstone has expanded its business into content, recruiting, talent management, and a massive ecosystem of partners.

Cornerstone has the DNA of a leader. While Workday, Oracle, SAP, and Skillsoft play in this market, none have the depth and breadth of Cornerstone. I know that the company is preparing to launch a massive new People Experience Platform this Fall, which has the potential to reshape the market. And both Phil Saunders (CEO) and Adam Miller (co-Board Chair) are aggressive leaders at their core, so this gives them lots of new opportunities.

I know that some private equity deals focus on wringing cash out of the company (the old playbook was to replace management, leverage up debt, and take out cash), but this deal is different. Cornerstone is the market leader and the company wants more “degrees of freedom” to invest, acquire, and expand. The management team is excited about this move.

The best example to consider is the way Ultimate Software was taken private by Heller Friedman in 2019. The company aggressively invested in sales and marketing, then acquired Kronos for market expansion, and has become one of the fastest-growing HCM Platforms in the market. Going private gave the team capital and flexibility to invest at this rate.

And I believe Cornerstone’s best days are ahead. L&D and HR buyers are frustrated and confused by the number of new tools in the market. If Cornerstone executes on its People Experience Platform strategy, you’re going to see some big deals come their way.

Additional Resources

This Fall I’ll be keynoting the HR Technology Conference, and later in the year, I’ll publish HR Technology 2022. Here are some resources to keep you up to date:

HR Technology 2021: The Definitive Guide

Demystifying the Learning Record Store

LTG Acquires GP Strategies: Learning Consulting Is Hot

HCM Excellence: The Definitive Guide