IBM Pays $1.3bn For HR Software Maker Kenexa

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IBM’s all-cash deal for Kenexa will allow it to enter the booming human resources software market and reinforce its social-business offerings

IBM is to acquire Kenexa, which offers cloud-based human resources (HR) tools as well as consulting services, for $1.3 billion (£820m), or $46 per share.

The all-cash deal represents a 42 percent premium on the Wayne, Pennsylvania-based company’s shares, emphasising the importance of the acquisition for IBM, which said it will combine Kenexa’s technology with its own social networking offerings.

Social networking power

“Every company, across every business operation, is looking to tap into the power of social networking to transform the way they work, collaborate and out innovate their competitors,” said Alistair Rennie, general manager of social business at IBM, in a statement.
Kenexa’s cloud software handles HR functions including recruiting, payment, performance management, orientation and training. IBM said Kenexa’s software and consulting fits well with IBM’s own social-media technology, with little overlap.

Social-media tools have become central to the HR and recruiting industry, which is currently experiencing strong growth, according to industry analysts.

“The acquisition provides an enclave into HR software solutions, which has healthy demand trends,” said Janney Capital Markets analysts Joseph Foresi and Jeffrey Rossetti in a research note. “IBM can use Kenexa to increase its touch points with different business leaders within an organisation.”

The deal follows other recent high-profile acquisitions in the HR market, including Oracle’s $1.9bn acquisition of Taleo in February and SAP’s $3.4 billion SuccessFactors buy in December.

Social acquisitions

Recent deals in the social-media market include Microsoft’s acquisition of Yammer for $1.2bn in June, Salesforce.com’s $700m buyout of social advertising platform Buddy Media for $689m and Google’s $250m acquisition of social advertising company Wildfire earlier this month.

IBM said the growth of social tools in the enterprise is also fuelling a corresponding boom in analytics, as companies look for ways to mine useful information out of the flood of data generated by social networks.

The company cited recent internal research which found that 57 percent of chief executives worldwide see social business as “a top priority”, while more than 73 percent were making “significant investments” into analytics.

Kenexa has more than 8,900 clients, including Boeing, General Electric, Starbucks, the United States Navy and Verizon. It has operations in 21 countries and about 2,800 employees.

IBM said it expects the deal to close in the fourth quarter of this year.

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