UPDATED: Ultimate Software will be acquired by an investor group led by private equity firm Hellman & Friedman. The all-cash transaction’s value, at $331.50 per share, is around $11 billion.
Under the agreement, Ultimate will continue to be led by founder and CEO Scott Scherr and his existing management team. Investors joining Hellman & Friedman in the deal include Blackstone, GIC, Canada Pension Plan Investment Board and JMI Equity.
According to Ultimate, $331.50 per share equals a premium of 32 percent over the company’s volume-weighted average price during the 30 trading days that ended February 1. On Friday, Ultimate’s stock closed at $277.83.
Separately, Ultimate reported recurring revenues of $997.1 million for 2018, a 24 percent increase the previous year. Total revenues rose 21 percent, to $1.14 billion. GAAP net income was $65.1 million, or $2.06 per share, compared to $14.1 million, or $0.46 per share, in 2017.
What Happens Next?
A Hellman & Friedman spokesperson said the move to go private was spurred, at least in part, by “the short-term focus of Wall Street.” Investors’ emphasis on quarterly results hampered Ultimate’s ability “to grow the team and invest in new products and services” at the pace it wants. As a privately held company, Ultimate will now “be able to focus on the longer-term vision.”
Interestingly, Kronos is among Hellman & Friedman’s portfolio companies. Asked whether Ultimate saw any synergies with those businesses, the spokesperson said only that the firm “will operate independently within H&F’s portfolio.”
Beyond that, the company wouldn’t say much about its future plans but didn’t indicate that great changes are in the offing..@UltimateHCM CEO: Going private will benefit customers & employees, allow 'additional, prudent investments' in products & services. #HR #HRTech Click To Tweet
In a press release, Scherr said the sale will bring “meaningful benefits to our employees and customers—both in the long and short terms” and allow the company to make “additional, prudent investments” in its products and services. He said Ultimate will be able to more quickly launch new features and services and continue its ongoing product development efforts.
No Change in Ultimate’s Culture
The company said the sale will have no impact on its much-emphasized culture. Last year, Ultimate was ranked third on Fortune’s list of best places to work. Among other things, it matches 40 percent of employees’ 401(k) contributions and pays all medical and dental costs. Ninety-eight percent of Ultimate’s staff call it a great place to work. In private conversations, numerous employees express an unusual faith in Scherr’s leadership.
“Hellman & Friedman is in full alignment with our vision to serve the global HR market, while preserving our unique company culture and mission,” Scherr said.
Asked for more detail, H&F’s spokesperson said the firm’s role as a strategic partner would allow Scherr and his team to continue prioritizing the company’s culture.
Among other things, that culture includes giving all employees an equity stake. That means its 5,100 employees should be in a good mood this week.The transaction is expected to close in mid-2019, subject to stockholder approval, closing conditions and regulatory approvals. The company will remain headquartered in Weston, Fla., where it has some 1,700 employees.
Updated Feb. 5, 2019, to include 2018 earnings and Hellman & Friedman comments.
Disclosure: Ultimate Software is a sponsor of the HCM Technology Report.
Sign up for our newsletter here.