Cornerstone OnDemand Inc. announced Feb. 24 that it was acquiring the cloud-based talent experience solutions software company Saba for $1.395 billion.
Over the next year, Cornerstone, a human capital management software provider, plans to incorporate Saba’s product portfolio into its own, extending the company’s reach from 40 million users to 75 million, according to a news release from Cornerstone.
“With the combination, our product development team is expected to significantly expand, giving us the ability to develop faster, further increase competitive differentiation and help millions around the world to overcome the skills divide,” said Adam Miller, CEO and founder of Cornerstone, in the release.
The cash and stock transition was unanimously approved by the boards of directors from both Cornerstone and Saba, according to the release. AlixPartners has been retained to help support the integration of the two organizations. The transaction is expected to close in the second quarter of 2020.
Until the transaction closes, Cornerstone and Saba will operate as two independent companies, said Deaira Irons, senior manager of public relations at Cornerstone.
This is the third big announcement from Cornerstone in 2020. Last month, Cornerstone announced it had acquired Clustree for $18.5 million and joined the Velocity Network Foundation as a co-founder.
“We remain committed to being a global leader in people development solutions and today’s announcement is another step in delivering innovative products to our customers,” Irons said.
Though the announcement was initially surprising, Cornerstone’s acquisition of Saba will really “double down” on their market offerings, creating a full-fledged and larger talent management suite, said Stacia Garr, a co-founder and principal analyst at RedThread Research.
“We know the market goes through cycles like this,” she added. “And this is a natural part of the cycle in terms of consolidation. What I think is maybe a little interesting here is that these are two big legacy players. With there having been so much innovation in our market in the last five years, it’s interesting to see this consolidation. As these two come together, who’s going to step into the space where they once independently were?”
Dani Johnson, RedThread Research co-founder and principal analyst, said this acquisition will help Cornerstone compete with enterprise resource planning and the larger companies that are encroaching on the human capital management space. Acquiring Saba “arguably makes [Cornerstone] the biggest cloud company in the world,” she said.
Additionally, Cornerstone’s dataset combined with Saba’s 2018 acquisition of Lumesse, as well as its 2017 acquisition of Halogen Software, will help Cornerstone keep up with top-market trends, such as the implementation of artificial intelligence, machine learning and being able to use datasets to develop new capabilities and insights, Garr said.
But Cornerstone is still competing with some of the smaller players, Johnson added, because integrations are getting easier. To compete with these smaller players, Cornerstone will now have the advantage of inheriting Saba’s view of the market.
“We weren’t sure [Saba was] going to make it when they went private five years ago, but they did, and they have done some really innovative things,” Johnson said. “They managed to rebrand themselves and start to make noise in the market again. And they’re really approaching the market differently. So now [Cornerstone] also has access to all of that mindset, and also the talent that did that.”
On the other hand, analysts at Fosway Group are skeptical of the impact of the acquisition from a competitive and capability standpoint: “Cornerstone is following the playbook on consolidation, but this move doesn’t seem to consider the growth that can come from acquisition in parallel markets. It fails to provide any additional functionality around time and attendance, workforce planning, core HR or payroll for example.”