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Announcement of Definitive Agreement for Acquisition of Glassdoor Expanding capabilities of HR technology platform

May 09, 2018
Recruit Holdings Co.,Ltd.

TOKYO, JAPAN (May 9, 2018) - Recruit Holdings Co., Ltd. ("Recruit Holdings" or the "Company") announced today that it has entered into a definitive agreement to acquire Glassdoor, Inc. ("Glassdoor") for $1.2 billion in cash. Glassdoor is one of the largest and fastest growing job sites in the world known for introducing greater workplace transparency through its rich database of company reviews, salary information and other company insights. Glassdoor will operate within Recruit Holdings' HR technology segment and will continue to be led by its current CEO and co-founder, Robert Hohman.

"I am delighted to welcome Glassdoor to the Recruit Group. Glassdoor presents a powerful platform that is changing how people find jobs everywhere," said Hisayuki Idekoba (Deko), COO of Recruit Holdings and Head of the Company's HR Technology Segment. "Glassdoor's database of employer information and the job search capabilities of Indeed complement each other well. Glassdoor's mission of helping people everywhere find jobs and companies they love is a great fit with Indeed's goal of helping people get jobs."

"Glassdoor continues to change the way people look for jobs. The opportunity to come together with Recruit strengthens the Glassdoor platform, enabling us to accelerate our growth so that we can better help job seekers everywhere find a job and company they love, and help employers hire high quality informed job candidates," said Robert Hohman, Glassdoor CEO and co-founder. "I look forward to leading Glassdoor through this exciting new chapter, and to exploring ways to leverage our combined resources and assets."

The transaction is expected to close during the second quarter of Recruit Holdings' fiscal year ending March 31, 2019, subject to closing conditions and regulatory approvals. The Company expects to finance the transaction using cash on hand.

1. Purpose of The Acquisition

Recruit Holdings believes that there are significant opportunities to use technology to achieve innovation in the HR industry. In 2012, The Company acquired Indeed, a leading job search site to be the platform for global online recruiting. In the mid-term, Recruit seeks to further expand in the US and globally through both organic growth and M&A investments.

In line with this growth strategy, Recruit Holdings has decided to enter into an agreement to acquire Glassdoor, one of the largest and fastest growing job sites in the world. Recruit foresees significant opportunities for growth as Glassdoor and Indeed collaborate to meet challenges faced by both job seekers and employers. This acquisition enhances the Company's position as the leader in job search, job aggregation, job seeker and employer matching, and utilizing direct job seeker input to improve the overall job search experience.

Glassdoor, founded in the United States in 2007, is well known for providing greater workplace transparency through its rich database of job and company insights provided by employees and candidates. Glassdoor combines job postings with this valuable data to make it easy for people to find a job that is uniquely right for them. As a result, Glassdoor helps employers hire truly informed candidates at scale through effective recruiting solutions such as job advertising and employer branding products. Glassdoor welcomes more than 59 million unique users (as of Jan 2018). Glassdoor currently has reviews and insights for more than 770,000 companies located in more than 190 countries. Headquartered in the San Francisco Bay Area, Glassdoor has approximately 750 employees.

2. Outline of subsidiary acquiring the shares

(1) Name RGF OHR USA Merger Sub Inc.
(2) Location Incorporated in the State of Delaware
(3) Title and name of the head Hiroaki Ogata - sole director
(4) Description of business Special purpose acquisition company
(5) Capital $10.00 dollars (1,000 shares valued at $0.01 per share)
(6) Major shareholders and shareholding ratio Recruit Holdings Co., Ltd. 100.0% (total of direct and indirect ownerships)

3. Outline of transferring subsidiary (Glassdoor)

(1) Name Glassdoor, Inc.
(2) Location Mill Valley, California USA
(3) Title and name of the head CEO: Robert Hohman
(4) Description of business Job site known for its large repository of company reviews and salary information
(5) Capital $75.3 thousands
(6) Foundation June 7, 2007
(7) Major shareholders and shareholding ratio Tiger Global Private Investment 14.2%
Benchmark Capital Partners 13.4%
Individual (undisclosed due to confidentiality agreement) 11.5%
Battery Ventures 10.6%
Individual (undisclosed due to confidentiality agreement) 7.4%
Other 515 shareholders 42.9%
(8) Relationships between the Company and Glassdoor Capital relationship There is no capital relationship between the Company and Glassdoor
Human relationship There is no human relationship to be noted between the Company and Glassdoor. In addition, there are no human relationships to be noted between persons associated with the Company or the Company's affiliates and persons associated with Glassdoor or Glassdoor's affiliates.
Business relationship There is no business relationship to be noted between the Company and Glassdoor. In addition, there are no business relationships to be noted between persons associated with the Company or the Company's affiliates and persons associated with Glassdoor or Glassdoor's associates.
(9) Consolidated financial results and consolidated financial position of the company for recent years (as reported by Glassdoor) (US Dollars in Millions)
Fiscal year Year ended
March 31, 2016
Year ended
March 31, 2017
Year ended
March 31, 2018
Net assets $39.3 $48.6 $38.6
Total assets 103.8 134.1 156.4
Net sales $79.2 $125.2 $170.8
Operating income / (loss) (43.9) (41.6) (22.7)
Net income / (loss) (43.9) (41.2) (22.2)

Note:Consolidated financial data for the year ended March 31, 2018 is unaudited.

4. Outline of Major Sellers of The Shares

(1) Tiger Global Private Investment

(1) Name Tiger Global Private Investment Partners VII, L.P.
Tiger Global Private Investment Partners IX, L.P.
(2) Location Cayman Islands
(3) Reason for foundation, etc. Limited Partnership formed in the Cayman Islands
Limited Partnership formed in the Cayman Islands
(4) Purpose Venture capital mainly investing in Internet companies
(5) Establishment January 6, 2012
September 10, 2014
(6) Total investment Not disclosed due to confidentiality agreement
(7) Investor, investment ratio, and overview of investor Not disclosed due to confidentiality agreement
(8) Overview of general partner Name Tiger Global PIP Performance VII, L.P.
Tiger Global PIP Performance IX, L.P.
Location Cayman Islands
Title and name of the head Not disclosed due to confidentiality agreement
Description of business General partners for venture capital funds
Capital Not disclosed due to confidentiality agreement
(9) Overview of local agent in Japan No agent in Japan
(10) Relationships between the Company and the relevant fund Relationships between the Company and the relevant fund The Company, persons associated with the Company or the Company's affiliates have neither directly nor indirectly invested in the relevant fund. There is no capital, human, and business relationship to be noted between the Company, persons associated with the Company or the Company's affiliates and the investors of the relevant fund.
Relationship between the Company and the general partner There is no capital, human, and business relationship to be noted between the Company, persons associated with the Company or the Company's affiliates and the general partner of the relevant fund or affiliates of the general partner of the relevant fund.
Relationship between the Company and the local agent in Japan Not applicable

(2) Benchmark Capital Partners

(1) Name Benchmark Capital Partners
(2) Location San Francisco and Woodside, CA
(3) Reason for foundation, etc. Limited Partnership formed in the State of Delaware, USA
(4) Purpose Venture capital mainly investing in high-tech industry
(5) Establishment May 24, 1995
(6) Total investment Not disclosed due to confidentiality agreement
(7) Investor, investment ratio, and overview of investor Not disclosed due to confidentiality agreement
(8) Overview of general partner Name Benchmark
Location San Francisco and Woodside, CA
Title and name of the head Not disclosed due to confidentiality agreement
Description of business Venture capital mainly investing in high-tech
industry
Capital Not disclosed due to confidentiality agreement
(9) Overview of local agent in Japan No agent in Japan
(10) Relationships between the Company and the relevant fund Relationships between the Company and the relevant fund The Company, persons associated with the Company or the Company's affiliates have neither directly nor indirectly invested in the relevant fund. There is no capital, human, and business relationship to be noted between the Company, persons associated with the Company or the Company's affiliates and the investors of the relevant fund.
Relationship between the Company and the general partner There is no capital, human, and business relationship to be noted between the Company, persons associated with the Company or the Company's affiliates and the general partner of the relevant fund or affiliates of the general partner of the relevant fund.
Relationship between the Company and the local agent in Japan Not applicable

(3) Battery Ventures

(1) Name Battery Ventures IX, L.P.
Battery Investment Partners IX, LLC
(2) Location Boston, MA, USA
(3) Reason for foundation, etc. Limited liability entities formed in the State of Delaware, USA
(4) Purpose Venture capital mainly investing in high-tech industry
(5) Establishment February 24, 2010
April 1, 2010
(6) Total investment Not disclosed due to confidentiality agreement
(7) Investor, investment ratio, and overview of investor Not disclosed due to confidentiality agreement
(8) Overview of general partner Name Battery Partners IX, LLC
Location Boston, MA, USA
Title and name of the head Not disclosed due to confidentiality agreement
Description of business General partner of Battery Ventures IX, L.P. and managing member of Battery Investment Partners IX, LLC
Capital Not disclosed due to confidentiality agreement
(9) Overview of local agent in Japan No agent in Japan
(10) Relationships between the Company and the relevant fund Relationships between the Company and the relevant fund The Company, persons associated with the Company or the Company's affiliates have neither directly nor indirectly invested in the relevant fund. There is no capital, human, and business relationship to be noted between the Company, persons associated with the Company or the Company's affiliates and the investors of the relevant fund.
Relationship between the Company and the general partner There is no capital, human, and business relationship to be noted between the Company, persons associated with the Company or the Company's affiliates and the general partner of the relevant fund or affiliates of the general partner of the relevant fund.
Relationship between the Company and the local agent in Japan Not applicable

Note: In addition to the shareholders described in this section, there are less than 50 corporate shareholders and approximately 465 individual shareholders who are not disclosed due to confidentiality agreements. There is no capital, human, and business relationship to be noted between the Company, persons associated with the Company or the Company's affiliates and those undisclosed shareholders.And those undisclosed shareholders are not associated with the Company or the Company's affiliates.

5. Number of Shares to be Acquired, Acquisition Price, and Shares Held Before and After The Acquisition

(1) Number of shares held before the transfer 0 share (number of voting rights: 0, ownership 0.0%)
(2) Number of shares to be acquired 93,506,249 shares
(number of voting rights: 93,506,249 on a fully-diluted basis)
(3) Acquisition Costs Shares of Glassdoor US$1,200 million Approximately ¥127.2 billion
Advisory fees, etc. (estimated) 1.3 billion
Total estimated amount ¥128.5 billion
(4) Number of shares held after the transfer 93,506,249 shares
(number of voting rights: 93,506,249 ownership 100.0%)

Notes:

  • (1) The total number of shares to acquire is on a fully diluted basis.
  • (2) The total amount to acquire the Glassdoor shares above is on a debt and cash free basis.
  • (3) The estimated total costs for the transaction is a sum of a yen denominated amount of the total US dollar amount to acquire the Glassdoor shares based on an exchange rate of ¥106.0 per US dollar and the estimated total transaction related costs such as advisory fees.

6. Schedule

(1) Date of decision May 9, 2018
(2) Date of agreement May 9, 2018
(3) Date of execution of share acquisition During a period from July 1 to September 30, 2018 (the Company's second quarter of the Fiscal Year ending March 31, 2019)

7. Future forecasts

On May 15, 2018, the Company will announce its consolidated financial forecasts for the fiscal year ending March 31, 2019, that reflects financial impacts of this transaction based on its preliminary assumptions such as the closing date above. On a preliminary basis, the impacts on its consolidated Revenue, EBITDA and Adjusted Net Income are estimated for ¥16.0 billion, (¥3.0) billion and (¥3.1) billion, respectively.

Related FAQs

Q1:Who is Glassdoor?

A: Glassdoor is one of the largest and fastest growing recruiting and jobs sites in the world.

Glassdoor has built a trusted and highly recognized brand known for introducing greater workplace transparency through its rich database of company reviews, salary information and other company insights.Glassdoor holds a growing database of millions of company reviews (770,000 companies with reviews), CEO approval ratings, salary reports, interview reviews and questions, benefits reviews, office photos and more.

These 40 million pieces of content are generated and shared by its community of more than 59 million unique users each month (as of Jan 2018).Glassdoor also offers recruiting and branding solutions for employers to help them promote their employer brand to candidates researching them and to advertise jobs to candidates.

Glassdoor is headquartered in Mill Valley, California, USA and was founded in 2007.

Q2:Please describe Glassdoor's business model.

A: Glassdoor's content for job seekers is free.

Glassdoor's revenue is from employers who are looking to recruit and hire. Glassdoor offers employers opportunities to advertise jobs and to promote their brand to potential candidates.

For Sponsored Job advertising, they offer a cost per click or subscription pricing model. They offer company profile pages for a subscription pricing model.

Q3:What are Glassdoor's key strengths?

A: Glassdoor has focused on increasing transparency in the job search experience by providing unique employer content.

As a result, Glassdoor has top of mind brand awareness among job seekers for their database of employer information including company reviews, CEO ratings, and salary data.They have also attracted a significant amount of job seeker traffic to their site.

Q4:How will Recruit Holdings be involved in Glassdoor's management and Post Merger Integration (PMI)? Are you expecting any synergies?

A: Recruit Holdings will maintain a hands off approach to Glassdoor, which is the model we have employed successfully with other portfolio companies we have acquired.Over time, we will look for opportunities to collaborate across our portfolio to serve job seekers and employers better.

Q5:How will Glassdoor complement the Indeed business?

A: Both companies' missions are to help people get better jobs, but each has prioritized how to improve the job seeker experience from different angles. While Indeed focused on simplifying the job search experience, Glassdoor focused on providing job seekers information during their job search. Glassdoor's database of employer information complements the existing job search capabilities of Indeed.

Both Glassdoor and Indeed are committed to the mission of helping people get jobs. While the companies will operate under their own brands, we will explore opportunities for them to collaborate over time.

Q6:Who will run Glassdoor post transaction?

A: Glassdoor will continue to be led by current CEO, Robert Hohman. Glassdoor will operate within Recruit Holdings' HR technology segment and Robert will report to Hisayuki Idekoba (Deko) in his capacity as Head of HR Technology segment.Glassdoor has an impressive bench of talent that we greatly respect and who will continue to operate the business.

Q7:What will the relationship be between Glassdoor and Indeed?

A: They will both operate as subsidiaries within Recruit Holdings' HR Technology segment as sister companies. They will continue to operate with their own separate and distinct brands.With similar missions of helping people get jobs, we anticipate that they will complement and work together in a number of important areas, such as job search, job aggregation, job seeker and employer matching, and utilizing direct job seeker input to improve the overall job search experience.

Q8:What are your plans regarding the future sales strategy? Will you integrate this effort or have separate sales and marketing teams?

A: Both companies have robust Sales and Marketing organizations, with expertise that aligns with their value proposition for both job seekers and employers, and we don't expect that to change as a result of this transaction. As a result of this partnership, we will evaluate the best solution for our job seekers and for employers going forward.

Q9:What are the financial impacts on Recruit Holdings' consolidated financials for the fiscal year ending March 2019?

A: On May 15, 2018, the Company will announce its consolidated financial forecasts for the fiscal year ending March 31, 2019, that reflects financial impacts of this transaction based on its preliminary assumptions such as the closing date above. On a preliminary basis, the impacts on its consolidated Revenue, EBITDA and Adjusted Net Income are estimated for ¥16.0 billion, (¥3.0) billion and (¥3.1) billion, respectively.

Q10:How will this impact the HR Technology segment's revenue growth and EBITDA margins in FY ending March 2019?

A: We don't provide forecasts on a SBU basis separately.

Q11:How did you determine the purchase price? You're paying an approximate 7.0 times multiple to LTM sales. When do you expect to see a return on your investment?

A: We are focused on deploying capital efficiently to ensure we are creating shareholder value.
We view the transaction as strategically important as it brings a very complementary set of assets to the HR Technology portfolio.

From our medium- to long-term perspective, this acquisition will allow us to create significant value for jobseekers and employers around the world.

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