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Mid-Market HR Outsourcing Transaction News:
The intersection of outsourcing, HR, and capital
- Empagio Workstream Acquisition
Workstream (Nasdaq: WSTM) a provider of talent management software and Empagio, a provider of payroll and human resources software today announced the signing of a definitive agreement in which Workstream will merge with the operating holding company of Empagio.
Pursuant to the merger agreement, Empagio will own 75% and Workstream will own 25% of the combined entity on a fully diluted basis. The agreement contains a holdback provision that will require Empagio to maintain cash flow targets for the one-year period following the closing or Empagio's equity holders will return up to 20% of the shares issued. Seth Bernstein, Chief Executive Officer of Empagio, will become a 60% majority shareholder of the company and will be subject to a lock-up agreement for a period of 18 months following the closing.
"The combination of Workstream with Empagio catapults our company to one of the top three human capital management ("HCM") providers overnight, and accelerates our transformation as we immediately become the only HCM company with a payroll services capability across North America" said Michael Mullarkey, Executive Chairman Workstream Inc. "Merging with Empagio creates a unique and compelling opportunity for our clients and shareholders, one that is a strategic fit and will create superior value through organic growth, profitability and scale."
"Empagio is well positioned to serve in the human capital management sector to corporations with more than 1000 employees, by providing a robust product, guaranteed world class service from a dedicated account manager, contract flexibility and pricing options all from one proven provider" said Seth Bernstein, CEO of Empagio. "Our 360(degree) offering is unique in the industry and will create virtually limitless opportunities to expand the way we service both current and future clients."
Empagio's merger with Workstream completes Mr. Bernstein's strategy for creating the industry's leading provider of payroll and human resource services for corporations with more than 1000 employees, the suite of products includes: payroll, human capital management, time and attendance, employee benefit administration, scheduling and tax filing. The combined company will service over 600 of Fortune 2000.
2/13/2008
- IHRIM Forecasts Vendor Consolidation, Social Network Growth in 2008
In 2008, information management vendors will continue to consolidate, corporate social networks will grow, talent management sales will cool down and the company to keep an eye on will be oDesk, according to Jacqueline Kuhn, chair of the International Association for Human Resource Information Management (IHRIM).
“This year will be one of financial challenges,” said Kuhn. “Human resources organizations will need to build the financial business case for purchasing applications, which has not been their strong suit in the past. If they do, we do see much opportunity for software sales, specifically in core HR management system (HRMS) products.”
Here’s a look at IHRIM’s forecast in detail:
1. Sales of talent management systems will begin to slow As corporations fret about a looming labor shortage, talent management and related technical solutions have been a hot area. These Web-based software packages track employees’ progress from the time they join a company until they leave, promising insight into timing promotions and ongoing recruiting needs. Despite their promise, corporate human resource (HR) managers are realizing these solutions require a steep learning curve and much organizational effort. Unless HR can make a solid business case for it, sales of such applications will likely slow in 2008.
2. Sales of non-ERP systems will take off with the growth of service-oriented architecture, HR managers are finding they can get a better product at a better total cost of ownership with a separate human resources management system (HRMS). Watch for strong growth in products from HRSmart, Spectrum and Ultimate – these companies’ products have full suites of functionality and established track records.
“This trend is occurring particularly in mid-to-large companies that operate PeopleSoft HRMS applications,” Kuhn said. “With SAP’s bundled pricing, it is pretty hard to justify not using SAP for HR. However, Oracle products are not bundled and there is a real business case in moving to a separate HRMS system when you factor in maintenance costs and upgrades to the PeopleSoft environment, as well as the uncertainty with the product direction that still exists.”
3. Workforce planning and management applications will have a break-out year: With the need for more efficient and productive employees, workforce planning and management applications will gain lots of attention this year. This is new territory for HRMS, and vendors such as Vemo and SynchSource are leading the industry with tools that link strategic planning to operations to workflow.
4. Vendor consolidation will continue: Expect to see vendors growing their market share and expanding their product offerings by buying small, innovative players. ADP, in particular, will likely acquire companies that round out its talent management offerings.
“With the rising cost of maintaining systems and the shortage of trained resources growing, outsourcing portions of IT support is no longer the exception,” Kuhn said. “The challenge to the HR information management professional is to become a better business analyst.”
1/31/2008
- Oasis Outsourcing buys PEOs
Oasis Outsourcing Holdings Inc. acquired Professional Employer Plans Inc., Advantage Employer Solutions Inc., and related companies. The acquired companies' office in Tampa will remain in operation. The companies' president Steve Harper, and executive VP, Robert "Bo" Liess, will continue with Oasis. "We are proud of our organic growth, which has significantly expanded our client base over the past several years," said Oasis President and CEO Mark Perlberg. Staffing Industry Analysts ranked privately held West Palm Beach FL-based Oasis as the sixth-largest PEO in the United States based on 2005 revenue.
The following link from early 2007 talks about a potential acquisition target:
http://www.ere.net/inside-recruiting/news/peopleclick-says-its-confident-despite-chaos-180364.asp
Below are links to articles about acquisitions that have taken place in this marketplace in late 2006:
http://www.ere.net/inside-recruiting/news/adp-shakes-things-up--179729.asp
http://www.ere.net/inside-recruiting/news/consultant-says-deal-was-a-good-179718.asp
1/18/2008
- Private Equity Firm to Buy Hewitt’s Software Unit
Hewitt Associates Inc. is selling its Cyborg payroll and human resources software services unit to Vista Equity Partners, a San Francisco-based private equity firm. Lincolnshire, Illinois-based Hewitt paid $43 million in May 2003 to acquire Cyborg. The acquisition of Chicago-based Cyborg allowed Hewitt to gain experience in the payroll field at a time the company needed to complete its suite of HR outsourcing services, Hewitt chairman and CEO Russ Fradin in a statement.
But Hewitt now is divesting Cyborg because licensing software is not core to its strategy of providing end-to-end benefits, payroll and workforce management services, said Jay Rising, president of Hewitt’s HR outsourcing business.
1/17/2008
- UnicornHRO Announces Mexican Payroll Solution
UnicornHRO®, a leader in human resources and payroll solutions, announces the addition of a new Mexican payroll solution. UnicornHRO’s partnership with Administrategia, a Mexico City based leading provider of HR and payroll outsourcing services and software, will bring companies a single solution for all their payroll processes, domestic or international.
1/19/2008
- January State of the Union
- In 2008 expect private equity-backed companies to do more add-ons to bolster their portfolio companies as they plan their integration and ultimate exits
- Many are looking for the U.S. middle market to continue at its high level of M&A activity throughout the year
- Regional consolidation in staffing, PEO, and RPO markets on private equity deal horizons
- The HRO SMB market is growing with approximately 200,000 US small businesses between 50 and 5,000 employees (Even with 10 – 20% less small businesses expected to be created in Q1 of 2008 than Q1 2007 adoption of HRO in some capacity continues to increase)
- Forgent Networks Moves Aggressively into Multi-Billion Dollar Workforce Management Market with Strategic Acquisition of Industry Leader
Company Doubles Software Business and Changes Name to Asure Software: “The iEmployee acquisition positions us to become a leader in the workforce management market and is a key milestone in achieving our strategic goal of becoming a pure-play software company,” said Richard Snyder, Asure’s chairman and CEO. “The acquisition moves us into a much larger market, provides customers with a significantly broader offering and, in combination with our current NetSimplicity Software business, immediately doubles our software revenue. We expect the transaction to be accretive to the earnings of our software business.”
The total purchase price was $10.7 million, the structure of which was a combination of cash and stock. iEmployee, which currently generates about $6 million in annual revenue and is profitable, provides a breadth of offerings targeted at small to mid-size organizations and divisions of enterprises. Its integrated suite of on-demand HR management software and services includes time and attendance tracking, benefits, pay stubs and W2 documentation, expense management, reports and salary planning.
Strong Long-term Model with 70 Percent Recurring Revenue. Asure currently has more than 3,500 domestic and international customers and generates about $12 million in revenue, approximately 70 percent of which is recurring.
Worldwide workforce management software revenue was $5.5 billion in 2005 and is forecasted to be $8.7 billion in 2010 (AMR Research). The demand for workforce management solutions delivered through the software-as-a-service (SaaS) model is growing at a healthy rate, particularly among small- to mid-size organizations. In fact, by 2008, more than 50 percent of new workforce management purchases by U.S. mid-market customers will be made with vendors through the on-demand or SaaS model (Gartner).
9/13/2007
- Cyborg, A Leader in Human Resources Management and Payroll Software is Now Accero
Cyborg, a licensed Human Resources and Payroll services organization, announced today they are rebranding the company and changing their name to Accero, Inc., effective immediately. The company's recent acquisition by Vista Equity Partners, a San Francisco-based private equity firm, prompted the change.
1/5/2008
- HR software company SuccessFactors has filed to go public, despite mounting losses that totaled $32 million last year. The company, which was founded in 2001 and competes in the fast-growing arena of talent management software, said its revenue rose from $10.2 million in 2004 to $13 million in 2005 and $32.6 million in 2006.
SuccessFactors may be bleeding cash, but it operates in a healthy market. Research firm AMR Research calls human capital management software the fastest-growing segment of the business applications market, with revenue expected to grow 11 percent annually during the next five years to $10.6 billion.
The IPO filing comes as a number of other HR software and services firms have been moving from public to private ownership. Among them are software firms Kronos and Workbrain.
Jason Corsello, an executive at consulting firm Knowledge Infusion, said in a blog posting Monday, July 23, that SuccessFactors is investing heavily in sales and marketing and in product development.
"The company is obviously taking a ‘cold war’ approach to the market, focused on outspending the competition," Corsello wrote. "This strategy will pose a significant challenge to many vendors that don’t have the financial resources or the ambition to dominate the market."
SuccessFactors faces competition from a variety of rivals, including the giants of the field Oracle and SAP as well as talent management specialists such as Halogen and Authoria. http://www.workforce.com/section/00/article/25/01/51.html
7/23/2007
- BPO Management Services Announces Completion of HRMS Acquisition
A San Francisco-based provider of human resources software to the middle market, “The acquisition of HRMS expands our customer base by adding over 100 new clients and will greatly enhance our HRO service offering, allowing us to provide the HRMS software technology directly to both new and existing customers,” said Patrick Dolan, chief executive officer of BPOMS.
http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20070702005192&newsLang=en
7/02/2007
--> Illustrates that both software and service organizations are committing significant resources and capital to the middle market.- Ephor Note
- 'Golden Age' of Private Equity
KKR demands that its managers sink their own money into the companies they run, works its contacts to find professionals who can help them, sets performance standards and fires people who fail. "Any fool can buy a company," Kravis said at a private equity conference in Frankfurt in February 2006. "The hard and important part of our job was what we did with the company to create shareholder value once we acquired it."
http://www.iht.com/articles/2007/07/01/bloomberg/bxkkr.php
7/2/2007
- Summit HR to Invest $5M in India
Global talent supply chain management company Summit HR on Thursday said it will invest $5 million to open eight more delivery centres in the country in the next 24 months.
Recently, Summit HR acquired a Bangalore-based staffing company 'Career Graph' to extend support for companies engaged in technology products, IT and ITeS.
http://economictimes.indiatimes.com/articleshow/2158823.cms 6/28/2007
- IMPACT Group buys Spherion's HR Consulting Unit
The Spherion unit had 2006 revenue of $12 million, according to IMPACT spokeswoman Melanie Winograd. The acquisition will expand the firm's portfolio of relocation, outplacement and retirement transition services.
"The sale of our HR consulting business is part of our ongoing strategy to focus our resources and future investments on our core business of providing recruiting and staffing services," Roy Krause, president and CEO of Spherion, said in a statement.
http://www.bizjournals.com/stlouis/stories/2007/06/25/daily21.html 6/26/2007
--> Shift and emphasis of focus on RPO and Staffing (management process of a consulting business significantly different. Ephor Note.
- Ceridian Adds Managed Learning Services To Its Human Resources Outsourcing Offerings
Ceridian has formed an alliance with GeoLearning, Inc., the leading provider of managed learning services and hosted learning and performance technology, to deliver this service to Ceridian's clients. "The strong demand in the mid-market for talent and performance management solutions that are easy to deploy and manage make this a partnership with tremendous potential," said Michael Morrison, senior vice president of corporate development for GeoLearning. "Adding GeoLearning's on-demand learning and performance technology to its suite of HRO offerings is a natural extension for Ceridian. And certainly we're excited about extending our learning solutions through Ceridian's sales and marketing network."
http://www.ceridian.com/corp/article/1,2868,14434-64853,00.html 6/25/2007
- IDC Briefing: Major Changes in the Human Resources Business Process Outsourcing Marketplace
IDC projects healthy revenue growth in this market from $11 billion worldwide in 2006 to $19 billion in 2011. Some key findings from the briefing include:
- As standalone HR outsourcing grows in the forecast period at a compound annual growth rate (CAGR) of 8.3%, comprehensive BPO, combining multiple HR functional towers, is growing at a CAGR of 14% for the same period.
- Buyers are increasingly combining HR functions with others, including finance and accounting, creating 'multi-tower' deals.
- After a steady decline, HRO pricing is on the rise and HRO provider profitability is increasing.
- Large, global HRO deals are on the decline. Only two to four are projected in 2007.
- New providers are still entering the market. 6/21/2007
--> The briefing provides support that demand is greater than supply for outsourced HR services such as recruiting and performance management. Business requirements across HR, IT, finance, and procurement are causing partnerships and mergers between some of the middle-tier BPO, FAO, and IT vendors. While consolidation is eventually inevitable, some companies will continue to work with a multitude of suppliers; while others will seek success from more strategic advisory/outsourcing relationships.- Ephor Note
- HR Technology Co. HighRoads Raises $9 Million in Series-C Financing
Software and Data that Bring Health Care Costs Under Control 2007-06-25
- Infor Closes Workbrain and Hansen Acquisitions
Infor Adds Applications, Domain Expertise to Increase Leadership in Areas of Human Capital Management and Local Government Solutions
6/01/2007
- Watson Wyatt to Acquire WisdomNet, Talent Management Software and Consulting Firm
Watson Wyatt Worldwide, a leading global consulting firm, announced today its intention to acquire WisdomNet, a Denver-based talent management solution and consulting firm.
http://www.watsonwyatt.com/news/press.asp?ID=17463
6/13/2007
--> Top "Strategic Workforce Planning" software firms: http://www.aruspex.com and http://www.infohrm.com - Ephor Note
- Sage Group Acquires Snowdrop
... chief executive, Sage, said, "The acquisition of Snowdrop brings to Sage a portfolio of HR and payroll software solutions for the UK mid-market, ...
EFYTimes 5/15/2007
-->"Packaged HR Solutions" that go beyond classical payroll services has accelerated in Europe - Ephor Note
- Northgate agrees to acquire majority stake in Arinso
Chris Stone, the chief executive of Northgate Information Solutions, has taken a big step toward fulfilling his ambition to turn the outsourcing firm into the world's largest payroll processing company
Independent, UK 5/02/2007
- Spherion Acquires Dallas-Based Resulte Universal
Specialty Technology and Accounting and Finance Staffing Firm Joining Spherion in Dallas and Houston FORT LAUDERDALE, Fla., PRNewswire-FirstCall 4/30/2007
--> Acquisition illustrates that the large staffing organizations are diversifying away from "Classical Commerical" staffing to the higher margin speciality staffing activities. - Ephor Note
- FFI Completes PEO Acquisition
Fortune Industries, Inc. (Amex: FFI) announces that it has completed its acquisition of Employer Solutions Group (ESG) of Salt Lake City, Utah. This is the second PEO acquisition in the past 90 days by Fortune Industries. ESG is a full service Professional Employer Organization (PEO) servicing small to mid-size businesses in the Salt Lake City and ...
PR Newswire
4/16/2007
- Human Resource Outsourcing: Emerging Trends Outsourcing of HR processes worldwide touched $59 billion in 2006. Who's sourcing from where? Human Resource Outsourcing (HRO) is a process in which a company uses the services of a third party to take care of its HR functions. A company may outsource a few or all of its HR-related activities to a single provider or a combination of service providers located in onshore or offshore destinations ...
4/15/2007
- Useful Capital is Fundamental to Mid-Market Business Owners Wealth ...
Useful capital provides strategic guidance, industry contacts, and operating expertise. While capital is always the stated need; history and experience show ...
Emediawire (press release), WA - Apr 18, 2007
- The Latest Quarterly Earnings and M&A Activity in the HR Marketplace
A summary of the latest quarterly earnings and M&A announcements, aggregated by HRmarketer.com, are below - the full report can be accessed (for free) at HRmarketer.com's site in the
HR Marketplace Earnings and M&A News: Tuesday, April 03, 2007
- Kronos Is Acquired for $1.8 Billion
Workforce management software provider Kronos, Inc. announced late last week that it is going private after accepting an acquisition offer worth nearly $1.8 ...
Managing Automation Magazine, NY - Mar 26, 2007
- Strategy: SLA Pricing: Stick vs. Carrot
A new trend among HRO buyers and providers is that more contracts are using "unit ... HR practice lead at EquaTerra, a Houston-based sourcing advisor. ...
Ecommerce Times, NY
05/06/07
- Gevity Acquires HRAmerica
Gevity Acquires HRAmerica. - Gevity (NasdaqGS:GVHR - News), which serves as the full-service human ...
biz.yahoo.com/pz/070219/113960.html : Financial News - Yahoo! Finance 2/19/2007
- UnicornHRO Completes Acquisition Of BMH, Inc., Developer of Open4® HRIS
UnicornHRO, a premier provider of human resources, benefits and payroll solutions, has completed the acquisition of BMH, Inc., the Dallas-based developer of Open4® human resource information and payroll solutions, according to Frank P. Diassi, Chairman and CEO of UnicornHRO.
The acquisition will strengthen UnicornHRO's position as a major provider of hosted and outsourced HR/Payroll services for the middle market and expand its capabilities and resources to better serve an installed base of 800 companies, supporting over three million employees throughout North America.
1/9/2007
For more information please contact us at ephor[at]ephorgroup.com.
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