Acquisition of Textkernel by Bullhorn Puts Staffing Industry on High Alert

Geert-Jan Waasdorp observes that Bullhorn’s acquisition of Textkernel presents a significant challenge for many traditional staffing firms. Where will they source their data, technology, and AI in the future? And how will they otherwise remain relevant?

Geert-Jan Waasdorp on June 27, 2024 Average reading time: 4 min
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Acquisition of Textkernel by Bullhorn Puts Staffing Industry on High Alert

Bullhorn’s recent acquisition of Dutch company Textkernel for – reportedly – 300 million euros is likely the kickoff for a further round of mergers and acquisitions in tech, data, and AI within the HR and recruitment industry. By purchasing Textkernel, Bullhorn has acquired one of the largest global AI and data players and dealt a massive blow to the competition.

With the purchase of Textkernel, Bullhorn has dealt a massive blow to the competition.

Since many staffing agencies and dozens of ATS and HR tech systems rely on Textkernel’s parsing and matching technology, they are now suddenly dealing with Bullhorn technologies. The leverage that Textkernel provides Bullhorn access to all these customers is enormous, given that the staffing market is worth between 350 and 600 billion dollars annually (depending on the source), and Textkernel serves the top of this market. This doesn’t even consider the damage/impact on other HR and recruitment tech systems now that the AI, data, and matching technology they heavily rely on is in the hands of one of their main competitors.

The leverage of Textkernel

Of the 10 largest staffing companies in the world, 8 use Textkernel’s data, matching, and AI technology, whether integrated into their ATS systems or called via APIs. In total, about 2,000 intermediaries worldwide use Dutch technology. This gives Textkernel a firm lock-in on everything essential for the industry to generate future returns. Very smart of Bullhorn, but also the selling party, Main Capital, because on a global level, Textkernel remains unmatched, especially after the purchase of the American Sovren in 2021.

Textkernel has a firm lock-in on everything essential for the industry to generate future returns.

The footprint of Textkernel is enormous within the staffing industry. At a time when automation, (big) data, and AI are key to leverage in this industry, partnering with Textkernel means a massive accelerator. Not many others can do this as well and globally as they can. The exciting part will be Bullhorn’s strategic choice since Textkernel is also the parsing, data, and matching engine in many of Bullhorn’s competing products.

Will Textkernel become an exclusive offering?

Will Bullhorn phase out Textkernel in these products, or even ‘cold turkey’ cut it off? Will Textkernel be offered exclusively, forcing many customers to switch to Bullhorn? And do Bullhorn’s competitors want an AI and matching engine ‘powered by the competitor’ in their system, which then collects an incredible amount of user data and knowledge? These are just a few questions that will undoubtedly be answered in the coming months (although if I were Randstad or the owner of SuccessFactors, I wouldn’t want to wait for that).

Do Bullhorn’s competitors want an AI and matching engine ‘powered by the competitor’ in their system?

In any case, I think the market has been shaken up by this brilliant move from Bullhorn, and companies like Taleo, iCIMS, Workday, Personio, and Greenhouse will be forced to rethink their strategic options. This has suddenly made all remaining competitors of Textkernel very interesting M&A candidates.

Who will buy Daxtra or Eightfold?

The purchase of Textkernel also shows the value of exclusive access to data, AI, and technology. It may not be the x-factor EBITA that determines value but unlocking thousands of new customers and taking technology off the market before the competition does. In that case, the next question is… who will buy Daxtra? However, companies like Actonomy, Techwolf, and Eightfold have suddenly become much more valuable due to this move.

No one wants to depend on their competitor or technology that the rest of the market can also buy.

Local players like Jobdigger, theMatchbox, SkillsCV, and 8vance could also benefit. Bullhorn’s strategic choices and how the rest of the market reacts will play a role in the short term. But one thing has become clear: no one wants to depend on their competitor or technology that the rest of the market can buy.

Red alert for the staffing industry

Virtually all global staffing agencies – except for Recruit Holdings – like Randstad, Manpower, AMS, Adecco, and GI Group have almost completely missed the transition in (big) data and technology, and thus also in AI. It’s even crazier. Because the staffing industry is struggling, the large agencies are more likely to be divesting in data and tech rather than investing and innovating. However, this only makes them more dependent on Textkernel and related companies.

Because the staffing industry is struggling, large agencies are more likely divesting than investing.

Now that Bullhorn has the dominant matching technology within the industry and there are virtually no alternatives, staffing companies are even more backed into a corner. And a company like Indeed (which presents itself as a matching company) has noticed this very well. Indeed, part of Recruit Holdings (the fifth-largest staffing company in the world) is increasingly claiming billions from the staffing industry. They make no secret of it.

Who will win, who will lose?

And Bullhorn has now seen this as well. It is certainly not out of the question that large brokers and/or staffing agencies will now set their sights on the remaining data and technology players with many customers. In addition to the previously mentioned parties, smaller VMS players or platforms could be interesting, giving them relatively cheap access to markets already attached to or even locked into that technology. This creates a new M&A dynamic, where some large players could suddenly find themselves at a significant disadvantage. Bullhorn has struck the first blow. I am curious whether it will now turn into a war in the staffing industry and who will win and who will lose.

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Geert-Jan Waasdorp

Geert-Jan Waasdorp

Entrepreneur and Investor at Intelligence Group, Academie voor Arbeidsmarktcommunicatie, Werf&, Arbeidsmarktkansen, Recruitment Accelerator en
Geert-Jan Waasdorp has been active in the world of job market communication and recruitment since 1999. He started his journey as an analyst, and grow into an entrepreneur, business owner, investor and innovator. Waasdorp is a guest speaker, blogger and author of several books on recruitment and employer branding.
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