Ultimate Software Sells for $11 Billion

By Sarah Fister Gale


n one of the biggest deals in recent HR technology history, Ultimate Software agreed to be acquired by a private equity group for $11 billion. The move will allow the cloud-based human capital management vendor to leave the pressures of Wall Street behind — at least for a while.

The February announcement was a surprise considering Ultimate appears to be thriving and has delivered steady year over year growth, said Holger Mueller, principal analyst for Constellation Research. “Usually private equity investors acquire troubled companies or those in transition but Ultimate is doing really well.”

The 29-year-old human capital management company, which provides a suite of tools including payroll, benefits management and talent acquisition, has more than 5,000 customers in 160 countries, and delivered $1.1 billion in revenues in 2018, up from $940 million in 2017. It dominates the market among mid-sized companies, and it has been expanding its client base to support larger global companies, making it increasingly competitive with Workday, ADP, and other industry leaders. The question now is what effect this acquisition will have on the company’s long term business prospects.

“My gut reaction is that this is probably a really good move for employees and customers,” said George LaRocque, founder and principal HCM market analyst for LaRocque LLC in New York. The company is already known for making significant R&D investments, and now that it won’t be pressured to deliver quarterly returns to public shareholders, it will more time and space to focus on long term strategy, he said.

While acquisition deals in HR tech are constantly happening, Mueller and LaRocque don’t see this one as an indicator of a new acquisition trend. “There are no other companies of Ultimate’s caliber that could go private,” Mueller said. One of its close competitors, Ceridian, just went public, and companies like ADP, Oracle and SAP are simply too big to acquire.

In the meantime, Mueller encouraged current and future customers to pay attention to Ultimate’s road map, and where it plans to invest R&D dollars post acquisition. The company is known for investing in new development, but it remains to be seen how this deal will affect that trend.

“It’s always a good idea to know what your vendors are going to do next,” he said. It is the best way to determine if the choices they are making today will meet a company’s needs in the future.