In this episode of the WorkTech Podcast, host George LaRocque sits down with David Hain, Founder and CEO of Gotham Growth, for a masterclass on the state of M&A, valuations, and investment across the Human Capital Management (HCM) ecosystem. As the head of the largest M&A advisory firm exclusively serving human capital, Hain brings thirty years of hands-on experience as an operator, founder, and board member. Together, they analyze why buyers are actively acquiring companies, how artificial intelligence is altering due diligence, and what founders must do to position their businesses for a successful outcome.
Why Capabilities Drive the M&A Market
Hain highlights a fundamental operational shift: chief revenue officers facing flat single-digit growth can no longer rely purely on organic execution. With engineering roadmaps constrained by priorities, acquirers are opting to buy capabilities rather than build them from scratch. At the same time, thousands of mid-market tech firms are realizing that lack of capital or legacy architecture limits their independent runway.
This dynamic is accelerating activity across key HCM sectors. Employer of Record (EOR) platforms continue to command strong interest as workforce models shift toward a mix of internal, contingent, and agentic labor. Additionally, payroll-based HCM giants are spending aggressively on talent acquisition platforms to fill long-standing product gaps, while frontline and hourly workforce technologies are benefiting from urgent retention requirements.
The Evolution of AI and Due Diligence
Reflecting on the last twenty-four months, Hain notes that the initial wave of AI caused a temporary pause as investors evaluated existential threats. Today, market expectations have matured. Acquirers are no longer impressed by generic AI promises; instead, due diligence now scrutinizes "token efficiency"—measuring compute costs against true margin expansion.
The most lucrative opportunities are emerging in tech-enabled services, where embedded AI workflows elevate operating margins without adding heavy headcount. Hain emphasizes that technology alone is no longer a defensible moat. Acquirers demand deep domain context and proven operational results before awarding premium multiples.
Valuation Realities: The 33,000 Portco Flush
Hain provides an unvarnished breakdown of current valuation metrics, marking the end of post-COVID peak multiples. With over 33,000 private equity portfolio companies sitting past their prime across the broader market, the market has firmly transitioned to a buyer's market.
While underperforming or stagnant firms see valuations holding at 1x to 3x ARR, solid companies with sustainable growth command 4x to 6x ARR. High-performing, scarce assets checking every box can still achieve 7x to 8x ARR. On the EBITDA side, tech-enabled service providers generally trade between 4x and 6x, with top-tier AI-integrated platforms reaching 10x to 12x. To avoid fire-sale scenarios, Hain urges founders to build relationships with corporate development teams years before an actual exit.
Key Takeaways
Buy vs. Build Dynamics: Acquirers are actively buying software capabilities and market access to overcome flat organic growth and congested product roadmaps.
EOR and Payroll Consolidation: Employer of Record platforms and payroll-based HCMs are aggressively acquiring talent acquisition and workforce orchestration technologies to support hybrid workforces.
AI Due Diligence Measures Efficiency: Due diligence has evolved to inspect token efficiency, unit economics, and embedded workflow margins rather than surface-level AI features.
Valuation Multiple Realities: ARR multiples have normalized from post-COVID peaks down to 1x–3x for struggling firms, 4x–6x for good performers, and 7x–8x for rare, high-growth assets.
Proactive Founder Strategy: Founders should establish relationships with potential acquirers and corporate development leaders 12 to 24 months prior to needing an exit.
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