Cornerstone and Sonar6 - A Really Good Deal

Cornerstone and Sonar6 - A Really Good Deal

Summary: Sonar6, the hippest, irreverent HR vendor out there has just been acquired by Cornerstone OnDemand. Is it a good deal or not?

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TOPICS: CXO, IT Employment
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Today, Cornerstone OnDemand (CSOD) acquired Sonar6. These two HR software firms each serve related but different HR spaces. CSOD is a full line talent management and learning HR vendor targeting mid-to-large enterprises. Sonar6 is a performance management and succession planning provider targeting the SMB space (but, in fairness, they also have a few large accounts, too).

I've written a fair bit about Sonar6 over the years and I always looked forward to seeing what new, irreverent, cool products and stunts they would bring to every HR Technology Conference.  I hope that continues. In fact, I strongly encouraged some of CSOD's competitors to try to buy Sonar6 years ago as that team had some amazing assets. Specifically, Sonar6:

  • Has some brilliant graphics design people who have created some of the slickest UI and presentation screens in the HR space - absolutely great stuff here
  • Nailed the way to market and sell SaaS software - Sonar6 had to get this right as they are based out of New Zealand yet approximately 80% of their revenue emanates from the U.S. and Europe. They knew they couldn't fly a sales team from New Zealand every time a prospect came a calling.  Approximately 30% of their deals never involve a sales person.
  • Brings a very young, cool vibe/energy to the HR space

CSOD intends to do the following post-deal:

  • Retain the Sonar6 leadership team and expand the rest of the staff complement
  • Keep Sonar6 product line separate and focused on the SMB space

I would also hope that CSOD also:

  • Brings the Sonar6 graphic design characteristics into their product line
  • Adopts some of the Sonar6 sales & marketing best practices
  • Uses some of the hipness of Sonar6 in its branding and marketing efforts (and to its culture as well)

Other recent M&A deals in the HR space were done as the acquirer may have wanted to:

  • Just buy customers/market share
  • Fill in some product line gaps
  • Cannibalize a couple of parts of the acquired product lines
  • Gain some cloud computing street cred

This deal differs as it looks like more of an innovation play coupled with a distinct move to a new market space (i.e., SMB).  When I spoke with CSOD's Jason Corsello a few minutes ago, he also reminded me of the "amazing stuff in mobile technology that's in incubation" at Sonar6. He's right - they've got a lot of cool things going on in their R&D labs. That should be accretive to CSOD, too.

As a result, this deal is more of a long-term play and not a short-term financial deal. I like it a lot and shame on the other HR/ERP vendors in the market for not seeing the value in such a firm. To see a video announcement re: deal, click here.

Topics: CXO, IT Employment

About

Brian is currently CEO of TechVentive, a strategy consultancy serving technology providers and other firms. He is also a research analyst with Vital Analysis.

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