Consultant Says Deal Was a Good One for Kenexa

Human capital management firm Kenexa Corp. has agreed to pay an aggregate purchase price of approximately $115 million for all of BrassRing’s assets, including $10 million in net cash.

Tod Loofbourrow, chief executive officer of Authoria, says this is a great transaction for the industry. “It gives Kenexa a more global footprint. Kenexa is very strong in the recruiting area, and it’s basically going out and getting more customers,” he says.

Rick Fletcher, president of HRchitect, agrees and says this acquisition helps both sides. He notes that for someone who isn’t an insider, it may be confusing as to why Kenexa, which already has two applicant-tracking systems, would acquire BrassRing.

BrassRing provides software, services, and outsourcing for 180 customers, across verticals such as aerospace, financial services, healthcare, and medical technology, and notes Time Warner, IKEA, ConAgra Foods, Inc., RR Donnelly, and Nissan Motor Company as major clients.

“BrassRing has a robust technology platform that has been proven at the largest global organizations in the world. The addition of BrassRing’s tier-one customer base, broad product suite, global product capabilities and infrastructure help to further extend Kenexa’s strong market position,” chief executive officer Rudy Karsan said in a company news release.

Karsan said the BrassRing acquisition will add value to customers from the small- and medium-sized business level, as well as to large global organizations.

“This brings them a higher-quality applicant-tracking system. Kenexa is becoming very respected in the industry. The chief executive officers of other talent-management software vendors are envious of what Rudy [Karsan] has done over there, and he is being rewarded back in stock prices,” says Fletcher. “BrassRing brings a strong sales force. This gives Kenexa a sales leadership that knows applicant-tracking systems and RPO solutions, and knows how to effectively compete with the Vurvs and Taleos. BrassRing also brings to Kenexa a stable and well-oiled customer support function,” he says.

Fletcher suggests that Kenexa should scrap its original applicant-tracking system, and instead use WebHire for small-to-middle-size enterprises and use BrassRing for larger organizations or those that are global or looking for an RPO solution.

“Rudy is going to have to piece the products together. If I were Rudy, I would buy a performance-management system to replace their CareerTracker product and acquire a good learning management system. He is missing a few talent management system components still, but doing an impressive job putting them together,” says Fletcher.

Fletcher also notes that this acquisition gives Kenexa a stronger foothold in the healthcare industry, since WebHire and BrassRing both have a long list of healthcare clients.

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Vendor Viability

Fletcher says BrassRing brings a more scalable applicant-tracking system that is typically used by larger companies. BrassRing, a combination of applicant-tracking systems and solutions provider, is a global product, and a product that works outside of the United States, in multiple different languages.

“With so many applicant-tracking systems out there, when buyers are out there looking, one key criteria is vendor viability. This gives their customers a really strong ‘white knight’; Kenexa is a really solid company. This also brings BrassRing customers additional consulting services around recruiting and HR functions,” he says.

Consolidating the ATS Space

Loofbourrow, who attended this week’s HR Technology Conference, says he witnessed 42 different applicant-tracking system vendors on the floor of the conference.

“Most of the companies you see today won’t be around in five years. There are three that will matter in a few years. Companies want one throat to choke; when something goes wrong, they want someone to hold accountable. There will be more demand for fewer but stronger vendors; the software vendor market is finally starting to step up and solve problems,” he says.

Headquartered in Wayne, Pennsylvania, Kenexa plans to close the BrassRing transaction in the fourth quarter of 2006 through a combination of cash and borrowings from its credit facility.

Elaine Rigoli has nearly 15 years of experience managing content and community for various B2B and consumer websites. Elaine has written thousands of business and technology articles and has been quoted in The Wall Street Journal and eWeek, among other publications.

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