With Merger Done, UKG Begins to Build a New Business

Construction Site

Ultimate Software and Kronos have been working under their new brand of UKG for just about a month, successfully navigating another step in the merger of two HR technology leaders. However, that step’s simply one of many, and much work remains in order to realize CEO Aron Ain’s vision of a truly unified organization.

When UKG’s identity was announced in August, Ain said that melding the two businesses would be challenging. However, he made it clear that his ultimate (no pun) goal was to form a single entity that offered a wide range of products and services to employers.

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“Two years from now, we’ll be known as that new company. There won’t be different platforms and different products and different billing systems and different business cards,” Ain told the HCM Technology Report. “I think two years from now, that oneness will be a dominant point of view.”

So far, the union’s most visible components have been in marketing and messaging: a new brand identity, a more unified voice. Observers give UKG good reviews for the way it rolled out its new logo and communication themes, which have emphasized commitment to culture and serving customers.

However, there hasn’t been much talk about product development, sales strategies and services delivery. At least not yet. While Ain didn’t say much about such efforts in August, he allowed that a number of internal groups were at work. By itself, the work of merging Kronos and Ultimate would lay groundwork for future efforts, he said, by providing opportunities for the formerly separate teams to collaborate. ““Those [groups] are all led by the people around the table, and they’re all led by building trust with each other,” he said.

Out of the gate, UKG generates an estimated $3 billion in revenue each year, employs more than 12,000 people and has an enterprise value of $22 billion. The organization of the company was announced in February, just a year after the private equity firm Hellman & Friedman, which already controlled Kronos, took Ultimate private an all-cash transaction worth about $11 billion.

Perfect Fits

From the beginning, analysts said that Ultimate and Kronos were close-to-perfect fits. They were home to similar cultures, headcount and revenue levels, not to mention remarkably complementary product lines. Ultimate, whose customer base tilted toward the enterprise, was known for its HCM solutions. Kronos, well-established among smaller employers, was strong in workforce management.

“Kronos and Ultimate combine core HCM platform capabilities and impressive people data and analytics together with time, attendance, workforce management, and planning,” wrote analyst George LaRocque on Unleash. “[That’s] an impressive suite of capabilities for HR leaders in the enterprise.”

However, LaRocque believes the merger is about more than platforms and data. PeopleDoc, an HR service delivery firm that Ultimate acquired in 2018, will be an important component of the company’s future, he said.

Having “market-leading HR service delivery … is amplified,” LaRocque wrote, “when the experience delivered by HR to the employee is in direct correlation not only to employee experience but also to trust in leadership and resilience.” Given the uncertainty in the business and economic worlds today, as well as varying approaches applied to the return to work, HR must rethink its service delivery strategy, as well as its ability to demonstrate its success, he believes.

With its focus on Europe, PeopleDoc is also UKG’s deepest stake in the overseas market, at least for now. In a press release, PeopleDoc co-founders Jonathan Benhamou and Clement Buyse said the merger, “will allow us to further accelerate our growth and continue to build a global leader in all aspects of HR services.”

UKG Investors See Promise

The company’s investors see the merger as a foundation on which to build a strong business. Deepak Advani, a partner at H&F, said that while combining the companies wasn’t part of some grand plan as the firm took Ultimate private, “We saw the synergies, to be totally honest with you, right out of the gate.” While H&F thought “a marriage would be fabulous at some point in the future, we didn’t know when that point would be,” he said.

Certainly, the logic of a merger was evident early on, Advani recalled. Ultimate and Kronos had only a handful of joint customers, but a lot of potential for cross-selling. At the same time, people from each company began to meet their new colleagues and mesh. Business combinations must make sense from an “industrial logic” point of view, Advani observed, but then culture comes into play, as well. Merging Ultimate and Kronos made sense on both counts, he said.

Disclosure: UKG is a sponsor of the HCM Technology Report

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