Demand Is on the Rise: Doubling Corporate Spend and a Sponsor-Led Buyer Set in Diversity, Equity & Inclusion Solutions

Diversity, equity, and inclusion solutions is the market for services corporations buy to change how they hire, promote, and train. It breaks into three commercial pieces: DEI training, delivered mostly by consulting agencies that assess a firm’s specific needs and build integration strategies; executive search for diverse candidates; and talent management tooling. Training is the largest of the three and the most established, generating roughly $8 billion in revenue annually.

What makes the sector interesting to acquirers is the gap between current spend and addressable spend. McKinsey puts 2020 corporate DEI spend at $7.5 billion and projects $15.4 billion by 2026. Global Industry Analysts sizes the solutions market at $9.4 billion in 2022 growing to $24.3 billion by 2030. And Bersin finds only 32% of US companies currently require any form of DEI training, which leaves roughly two thirds of the market unaddressed. Deal volume has followed, running near all-time highs with private equity taking the lead role for the first time.

DEI Industry at a Glance

What the Sector Sells

DEI shows up in talent recruitment, identity-based groups, and employee training. Of all the available solutions, training has been the most common form of increasing workplace diversity. It is normally delivered by DEI consulting agencies that use specialized programs to assess a firm’s specific needs and provide integration strategies. The other two common approaches are searching for diverse executives through executive search firms and deploying advanced talent management resources. Training, executive search, and talent management remain the primary approaches for implementing DEI initiatives, and the growing demand for improving corporate cultures is what fuels all three.

The Case Buyers Are Underwriting

The sector’s pitch rests on measured business outcomes. Research and Markets analysis shows inclusive workplaces generate nearly 2.5 times more revenue per employee. McKinsey finds that teams in the top quartile of gender diversity have a 25% higher likelihood of generating above-average profits. Harvard Business Review reported that diverse companies are 70% more likely to capture new markets. Deloitte research links diverse settings to improved employee engagement and morale.

The retention argument is the sharper one commercially. McKinsey research found 51% of employees who recently left their jobs cited a lack of belonging as a critical factor, and Glassdoor reports 75% of respondents weigh diversity when evaluating job offers. Failure to leverage diversity may lead to talent attrition, which converts DEI spend from a values line item into a cost-of-turnover calculation.

Growth Prospects

The DEI training industry is projected to grow at a 12.6% CAGR from $9.4 billion in 2022 to $24.3 billion in 2030. Growth is attributed to the rising significance of DEI in corporate environments and the constant need for updated and relevant training driven by ongoing initiatives. The addressable market is the larger part of the story: with only 32% of the market currently reached, the remaining 68% represents the sector’s primary expansion path. Technological advances are widening the delivery channel alongside it, enabling training through mobile apps, cognitive assessments, virtual seminars, and open forums.

DEI Solutions Deal Volume

M&A activity in the sector remained robust in 2023, with 11 deals announced or completed year to date against 5 recorded in the same period of 2022. Total 2022 volume was 13. The report projects a potential 22 deals by the end of 2023, and notes that the year is running near all-time high levels of activity with two quarters still to go. The all-time peak in the series is 15 transactions in 2021.

Private Equity Has Taken the Lead

Of the 11 transactions, 7 were driven by private equity firms and 4 by strategic buyers, a 64% to 36% split. That is a reversal. Historically strategic buyers have played the larger role in this industry, which makes the past two years exceptional in terms of sponsor involvement. It is the single most important structural change in the report: sponsors are now underwriting DEI services as a platform category rather than leaving it to consultancies and staffing groups to absorb.

What Is Driving It

Part of the demand is post-pandemic. As individuals returned to office settings, the need for a safe and inclusive work culture that fosters a sense of belonging became more pressing, and training, executive search, and talent management are the levers available. Separately, the linkage of management compensation to DEI goals has incentivized usage of these solutions, which drives demand from a second direction: not just as a cultural program but as a measured executive objective.

The transaction record reflects a sector still defined by services rather than software. Recruitment, executive search, and consulting businesses dominate the list, with a smaller cluster of e-learning and compliance-training platforms. eQuality Solutions appears twice, Traliant twice as a target under different owners, and Randstad twice as an acquirer.

Navagant Case Study

Navagant served as the exclusive sell-side advisor to Yardstick Management on its sale to Diversified Search Group, a portfolio company of Shoreview Industries, in January 2023. The transaction received a 2023 M&A Atlas Award for Deal of the Year.

Notable Transactions

May 2023: Hays, an HR services and recruitment consultancy, announced a majority stake purchase in the consulting business of Vercida Consultancy, a UK-based DEI advisory agency. The acquisition expands Hays’ advisory services to include DEI offerings and broadens its range of workplace services. Alistair Cox, CEO and Co-Founder of Hays, said the purchase would increase the firm’s ability to deliver Diversity, Equity and Inclusion services and allow more meaningful conversations with clients who, almost without exception, see DE&I as a significant challenge and want a partner who can help.

April 2023: CIPHR, a UK-based HR provider, acquired Marshall E-Learning Consultancy, which supplies specialist diversity and inclusion online learning intended to give flexible, managed, and affordable workplace e-learning options. Marshall extends CIPHR’s reach with new content offerings and creates a path from customers trained on Marshall’s content to CIPHR management solutions. Sion Lewis, CEO of CIPHR, said demand for online and blended workplace learning was stronger than ever.

July 2022: BerlinRosen, a US-based strategic communications, digital, and creative agency, acquired Onward, a professional consulting firm with a stated mission to mitigate oppression and increase diversity in the workplace. Onward supports BerlinRosen’s Cultural Competency division and helps deliver new DEI engagement strategies, with individuals trained by Onward able to use BerlinRosen’s offerings to communicate their changes. Thaly Germain, founder of Onward, said it was fundamental to join an agency that both represents organizations at the forefront of innovation and does the same DEI work internally.

Public Company Data

There is no pure-play public DEI solutions company of scale, so the comparable set is built from the consultancies and staffing groups that house these services: Accenture, Booz Allen, Korn Ferry, Heidrick & Struggles, ManpowerGroup, and others. That mix explains the spread. Accenture trades at 3.2x revenue and 16.7x EBITDA on a 19% margin, while the staffing names cluster at 0.2x to 0.4x revenue on 3% to 4% margins. Professional Diversity Network is the only name in the set built specifically around diversity recruitment, and at $33 million of market capitalization and $8 million of revenue it is too small to anchor a valuation. Median EV/Revenue of 1.0x and median EV/EBITDA of 8.8x are the reference points the report uses.

Select Transactions

The table below covers 36 DEI solutions transactions from January 2020 through July 2023, spanning DEI consulting and training, executive search with a diversity mandate, recruitment process outsourcing, and workplace compliance e-learning. Enterprise value and multiples are shown where disclosed. The highlighted row is a Navagant transaction, and CF denotes confidential terms.

Buyer Universe

Our team has long-standing relationships with many of these firms through recent transactions we have represented in the DEI solutions industry. We also track buyers that have been highly acquisitive in the broader social impact consulting and solutions sector, particularly those completing notable M&A transactions. That sector expertise and network gives us insight into this buyer universe and into the growth drivers for the companies within it.