The weekly wrap is where TLNT shares the stories that didn’t quite make it into a full post this week. We’ll also share links to some of our favorite things we read this week about HR, people development, the future of work, and more.
Kronos and Ultimate Software are taking the plunge, announcing a definitive agreement to merge the two companies yesterday in a pairing first revealed by The Wall Street Journal. The deal is expected to close at the end of March 2020, and the two companies estimated value is pegged at $22 billion on $3 billion in revenues. Aron Ain, Kronos’ chief executive officer, will lead the combined organization of 12,000+. There were no announcements about the rest of the executive team.
The mechanizations behind the move seemed to take very few people by surprise. Hellman & Friedman, the San Francisco-based private equity firm, is the controlling shareholder for both Kronos (acquired in 2007) and Ultimate Software (acquired in 2019). The two companies represented its only significant investments in HR technology currently.
“I am surprised at the speed they decided to do the merger,” said Sarah Brennan, founder of advisory firm Accelir. “I was expecting it to be in 2021. Depending on how the next 18 months are handled, it could be a huge win.”
Analyst Madeline Laurano, founder of Aptitude Research, shared with TLNT that she sees a lot of cultural similarities between the companies. “They have both transitioned from public to private companies but are very transparent with the information that they share,” said Laurano. “Aron and (Ultimate Software founder) Scott Scherr are very respected and truly care about the employees that work there.”
Laurano also sees complementary products from both companies, “with Kronos focused on workforce management and Ultimate on unified HCM with strength in payroll and talent management.” The companies have made no specific public mention of their plans for the future of their product lines, some of which include duplicate functionality. Holger Mueller, a principal analyst for Constellation Research, predicts that a single software suite combining elements of both Kronos and Ultimate newest offerings will be in market in two to three years. There’s also an opportunity to continue to do well in the SMB market and move into areas where neither company is as strong — like talent acquisition said Laurano.
The companies will be jointly headquartered in Lowell, Mass. and Weston, Fla. and expect to grow by 3,000 employees in the next three years. Given the very people-centric cultures of both organizations, it’s hard to see even a majority Kronos-led organization leaving South Florida anytime soon.
According to Apps Run the World research from 2018, Ultimate Software and Kronos were the sixth and seventh largest HCM providers based on market share. The combination likely catapults them to a top-three provider by those measures, in the same neighborhood as SAP, Oracle, and Workday and likely the largest pure HCM player.
Both Kronos and Ultimate Software will have a lot to figure out in the coming months as the executive team gets settled, and a new product roadmap is defined. No merger is ever easy, but in a few months, we’ll likely hear rumblings on how it is playing out both internally and in sales and renewal conversations.
A battle of the billboards and responding to legal threats in rhyme might sound cool, but probably not when it’s two HR software providers. Rippling, founded by the former CEO of Zenefits Parker Conrad, took out several billboards and bus ads in San Francisco that said, “Outgrowing Gusto? Presto Change-o.” Gusto, another HR software provider, did not take kindly to this and sent a cease & desist notice to remove the advertisements. This is where we’ll pick up the story from TechCrunch:
In an email to staff provided to TechCrunch, Rippling CMO Matt Epstein wrote, “We take legal claims seriously, but this one doesn’t pass the laugh test. As Gusto says all over their website, they focus on small businesses.”
So rather than taking Gusto to court or trying to change Clear Channel’s mind, Conrad and Rippling did something cheeky. They responded to the cease & desist order in Shakespeare-style iambic pentameter.
You can read the full poetic response on SlideShare — or maybe you can catch it when Rippling general counsel Vanessa Wu enters it into some poetry competitions later this year.
You might be wondering how Gusto could force the takedown of a competitor’s ad. Companies can name competitors in advertising as long as they are truthful in their claims. Gusto argues that Rippling was not, saying that there is technically no ceiling for the number of employees Gusto can support. Unfortunately, a Gusto spokesman admitted that their 1,000+ employee organization had switched to Workday.
This drama is good for fans of HBO’s Silicon Valley who like to see the series continue in real-life form as often as possible but likely matters little to the clients these two companies serve.