Ultimate Software, Kronos Merger is Logical, Fast, Analysts Say


Ultimate Software and Kronos, both controlled by the private equity firm Hellman & Friedman, will merge to form a single HR technology provider with $3 billion in revenue, more than 12,000 employees world-wide, and an enterprise value of $22 billion.

The new company plans to add 3,000 employees over the next three years. Kronos CEO Aron Ain will become chairman and chief executive officer, while Ultimate CEO Adam Rogers will depart after assisting with the transition.

Eventually, the combined company will announce a new name. For now, each business will continue to operate as either Ultimate Software or Kronos, sources said.

Ultimate Software and Kronos, both controlled by PE firm Hellman & Friedman, will merge, the companies announced. @UltimateHCM @Kronos #HR #HRTech Share on X

Industry analysts say the merger is logical and plays to each business’s strengths. Ultimate doesn’t have a particularly strong workforce management component, while Kronos isn’t known for its HCM solution, said Trevor White, an analyst at Nucleus Research in Boston. However, put together the companies will offer a suite of tools touching nearly every facet of workforce and human capital management.

Synergies After All

The merger comes about a year after Hellman & Friedman took Ultimate private in an all-cash transaction worth about $11 billion. (H&F acquired Kronos in 2007.) At the time, H&F declined to acknowledge whether it saw any synergies between the companies, saying only that Ultimate would “operate independently within H&F’s portfolio.”

Pete Tiliakos, principal analyst with Boston-based NelsonHall, said the merger “isn’t a big surprise, though I’m surprised it came so soon.”

“These organizations are very similar in terms of revenue, culture and headcount,” Tiliakos said. He and other analysts pointed out their customer bases fit neatly, with Ultimate’s customers leaning toward the enterprise while Kronos enjoys a greater presence among smaller organizations.

David Wilson, CEO of the UK-based analyst firm the Fosway Group, said the merged companies will enjoy “plenty of cross-sell potential as well as the ability to play higher up in the enterprise market over time.” However, he said, both companies “are quite U.S.-centric” despite having an overseas presence, and it isn’t clear how the merger will impact their efforts to expand internationally.

Consolidation for Opportunity

The merger leaves the market with one less vendor holding large enterprise ambitions, said Holger Mueller, vice president and principal analyst at Constellation Research in Monte Vista, Calif. As a result, he expects more enterprises to consider Kronos as an HR tech option. Also, the merger trims the number of choices available to smaller employers, who usually “shortlist” ADP, Ceridian and Kronos, he said.

In a statement, Ain said combining the Kronos and Ultimate teams “will create a company that is truly People Inspired.” (Emphasis his.) “Together, we will expand the value we deliver to customers and create the industry’s most comprehensive human capital management and workforce management solution for organizations around the world.”

When Ultimate went private, many observers wondered what would become of its “People First” culture. In the months since that deal, the impact has proved to be minimal. Speaking of the Kronos/Ultimate merger, Tiliakos said he was curious to see if Ultimate’s approach to culture and benefits can scale along with the new company’s business and whether it will spread over to Kronos. “I don’t anticipate employees are going to lose out,” he said.

“After many years of a growth-oriented partnership with Kronos, and a more recent, successful relationship with Ultimate, we have strong conviction in the deep compatibility of these two companies and the unlimited growth potential of this sector,” said David Tunnell, an H&E partner who serves as lead director of Kronos and chairman of Ultimate. “We know that by creating an inspiring place to work and putting people first, this combined company will thrive for years to come.”

H&F will be the controlling shareholder of the newly formed company. Private equity funds managed by Blackstone will be the largest minority investor, followed by GIC, Canada Pension Plan Investment Board and JMI Equity.

Updated Feb. 24, 2020, with more details and analyst interviews.

Disclaimer: Ultimate Software is a sponsor of the HCM Technology Report.

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