Taleo announced a definitive agreement today to acquire Vurv for $128.8 million in cash and stock amidst record financial results. Over the next month Taleo is going to identify how to best integrate the new company and report back to the market, but some initial thoughts are:

  • This acquisition is very similar to competitor Kenexa’s acquisition of BrassRing for $115 million in October, 2006. The main difference is Taleo has a dominant existing applicant tracking system (ATS), whereas Kenexa was looking to fill a product gap along with rolling up customers. This means that Taleo’s acquisition is much more of a land grab than Kenexa’s.
  • Taleo will acquire two net-new products — compensation management and transition management.
    – Compensation management is a fairly standard component of vendors offering performance management software to enable pay-for-performance and, if tightly integrated, will make Taleo more competitive in the performance management space.
    – Transition management is a product that helps manage off-boarding. It is a decision support tool that supports management during workforce reductions, mergers, and acquisitions. This product is unique to the market, and critical to end-to-end recruiting offering.
  • Taleo will now have competing products for performance management and recruiting management. I expect these products to run independently for the short-term with a heavy push of migrating performance customers to Taleo’s new performance management platform. Customers with highly customized instances of Vurv’s recruiting product (we know you are out there) are at the greatest risk because they will either be forced onto one of the SaaS platforms or suffer from limited support of their customized software.
  • Vurv has always struck me as a vibrant, innovative company with much of its zeal coming from CEO Derek Mercer. In Taleo’s conference call, Taleo CEO Michael Gregoire stated that Mercer would only stay on for a short period of time. Taleo will need to be careful to protect Vurv’s culture or deliberately integrate it into theirs.

A month from now we will know a lot more about the integration strategy of the recently announced acquisition, but it is safe to say that there are now two dominant companies (not necessarily products) in the talent acquisition space — Kenexa and Taleo.

Zach Thomas, Senior Analyst
Business Process & Applications
Forrester Research