mergers and acquisitions

February 20, 2020June 29, 2023

Ultimate Software merges with fellow HCM platform Kronos Inc.

Call the merger of Ultimate Software and Kronos Inc. one of those surprising, not surprising deals.

The Feb. 20 announcement came as a surprise. But then, they’re both owned by the same private equity company. Their HCM software — Ultimate Software’s human capital management and Kronos’ workforce management — play together nicely, although it would be an interesting comparison to put them both side by side and analyze their similarities and differences.

Also, both Ultimate Software and Kronos tout their employee culture as huge selling points. Earlier this week Ultimate was ranked No. 2 on Fortune’s Best Companies to Work For list, while Kronos clocked in at No. 52. Ultimate Software also took the Gold in the 2019 Workforce Optimas Awards’ Corporate Citizenship category.

Kronos Inc. CEO Aron Ain will head up the merger between his company and Ultimate Software.

In the press release issued just after 10 a.m. Central time, one of the first points made was their vaunted corporate cultures. “Combining two exceptional, highly compatible cultures will create a company that is People Inspired” (their italics, not mine).

Considering this is a merger of like organizations, the dreaded “duplication of efforts” specter hangs heavy. Are layoffs, buyouts, rightsizing or downsizing in the future of this new marriage? During this honeymoon period they are saying all the right things, noting that the combined organization will have 12,000 total employees “with further plans for growth including the addition of 3,000 employees over the next three years.”

Aron Ain, longtime Kronos chief executive officer, will be the CEO and chairman of the combined company – “guiding an experienced executive team comprised of leaders from both Ultimate and Kronos.”

There was no mention in the release regarding the future of Ultimate Software CEO Adam Rogers, who took the full CEO title in January 2020. Rogers does offer up this quote in the release: “The combination of Ultimate and Kronos paves the way to deliver the next generation of employee-facing solutions that will set the standard for the workforce of the future. This merger will enable our more than 12,000 inspired people around the world to deliver innovation in human capital management faster than ever before. Both companies remain fully committed to their core strengths as well as to the combined benefits that the new company will bring to employees and customers.”

That could very well be the case. With the meshing of cultures, perhaps no department or staff member will be downsized. Maybe they’ll reskill portions of their workforce.

Still, for those of us who have been through a merger or acquisition, the reality is people leave. Some leave voluntarily because it’s not a good fit anymore, or they’re simply laid off.

I hope and pray that the people at Ultimate and Kronos — which according to the release will remain headquartered in Weston, Florida, and Lowell, Massachusetts, respectively — will retain their jobs and blend into one big, happy, 12,000-employee company with room to grow.

Now that I think about it, when I requested media credentials to cover Ultimate Software’s user conference in early March, PR maven Kelsey Donohue mentioned that I shouldn’t miss the Tuesday general session.

I checked the agenda. Michelle Obama is speaking on Wednesday. That’s pretty awesome. But I could not find the keynoter for Tuesday. I didn’t really give it much thought, but now … the conference and especially Tuesday’s opening session takes on a whole new level of verrrry interesting.

February 7, 2020June 29, 2023

Labor issues when you acquire a company with a union

Spotify recently announced that it is acquiring The Ringer, one of the most prolific and popular podcasting networks.

Spotify also indicated that it intends to hire all of The Ringer’s 90 employees, most of whom work on theringer.com, which covers sports and culture and which Spotify indicates it will keep up and running.

Last summer, 66 of those 90 employees signed union-authorization cards stating their support for the Writers Guild of America East to represent them as their collective bargaining representative. Shortly thereafter, The Ringer management voluntarily recognized the Guild as the union representative for its employees.

What does this mean for Spotify? Is it acquiring a labor union as part of its purchase of The Ringer? Like most legal questions, the answer depends on a number of factors.
The primary question relates to the structure of the deal itself. Is it a stock purchase or an asset purchase?

If it’s a stock purchase — the buyer is acquiring all of the stock of the seller — this issue is much easier to solve. In a stock purchase, the buyer stands in the place of the seller and becomes responsible for all of the seller’s obligations, including its union-related obligations and any existing collective bargaining agreements. In other words, if Spotify purchased all of the stock of The Ringer, then Spotify is almost certainly acquiring its union and related obligations.

The fact that Spotify said that it intends to hire all of The Ringer’s employees, however, makes me think this deal is an asset purchase and not a stock purchase. And in an asset purchase, these issues are much more complex.

In an asset deal, the buyer assumes some, but not necessarily all, of the seller’s union-related obligations, but only if the buyer is a “successor employer.” A buyer is deemed to be a successor employer when it continues the predecessor’s business and hires a majority of its employees from the predecessor’s union employees.

A successor-buyer must recognize and bargain with the union, but it does not necessarily adopt the predecessor’s collective bargaining agreement. Instead, the buyer is usually free to set its own initial terms and conditions of employment before bargaining in good faith to a new collective bargaining agreement (as long as the buyer does not mislead employees into believing they will be re-hired without changes to their terms and conditions of employment, which will lock the buyer into the old agreement).

What I hope you take away from today’s post is the complexity of these issues. If you are involved in the sale or purchase of a business that has unionized employees, you absolutely need to involve labor counsel in the deal so that the parties understand what union-related rights are being bought and sold.

May 10, 2019March 3, 2021

Australian Tech Entrepreneur Becomes President of Workforce

A group led by Australian technology entrepreneur Tasmin Trezise acquired Chicago-based Human Capital Media, the parent company of business-to-business publications Workforce, Chief Learning Officer and Talent Economy.

Trezise, 26, is the co-owner of Brisbane, Australia-based Tanda, a 7-year-old technology firm that produces time and attendance, scheduling and labor-compliance software.

“I look forward to working with the team as we continue to uphold the dignity, research and empowerment of the working man and woman,” Trezise said.

The Human Capital Media entities will operate separately from Tanda with a shared ownership, said Trezise, who will be president of Workforce, a multimedia publication that covers the intersection of people management and business strategy. Kevin Simpson will remain president of all other Human Capital Media properties, Trezise said.

“This is about serving the Workforce mission of bringing together HR, learning, engineering, research and stakeholders in the success of working people and I put the call out for them to join us,” Trezise said. “The vision is to deliver on my promise to resurrect the Workforce history and continue its rightful position as the ultimate source for how the way we work is changing.”

He pointed to the long history of Workforce as inspiration for its planned future. The publication’s history dates back to 1922 with the founding principles laid out by James R. Angell, former president of Yale University, Carnegie Corp. and the National Research Council, to coordinate the efforts of over 250 scientific, engineering, labor, management and educational bodies. Trezise aims to shape Workforce into the clearinghouse for the most advanced thinking and solutions on the future of work; and how to improve the happiness, welfare and efficiency of workers.

“I want to bring my background and experience to carry on the mission that was first formulated in 1922,” he said. “This means reuniting all engineering and technological bodies with critical research to help people leaders better connect and pursue the application of this knowledge for the benefit of their teams.”

Founded in 1999, Human Capital Media is an integrated information services and market intelligence company whose brands include Human Capital Media Research and Advisory Services, and Chief Learning Officer and Workforce magazines. Terms of the private deal, which closed April 30, were not disclosed.

The company will remain headquartered in Chicago.

October 11, 2018June 29, 2023

Assessing the Impact of the Aetna-CVS Merger on Employer Benefits

The Justice Department announced on Oct. 10 its approval of the $69 billion Aetna-CVS Health merger, the latest blockbuster deal between health care companies in recent years, according to the New York Times.

The Justice Department last month also approved Cigna’s takeover of Express Scripts, while Amazon purchased online prescription company PillPack in June 2018 as its entry into the prescription drug-health care business.

CVS is the nation’s largest retail pharmacy chain, and Aetna is the third largest health care company. CVS Health Corp. first announced its intention to acquire Aetna in December 2017.

Tucker Sharp, global chief broking officer at Aon Health Solutions, said the merger fits into a general trend in health care. Over the last five years, health care companies have been focusing on vertical mergers whereas in the previous 20 years they were aiming for horizontal mergers, which helped gain scale and leverage to build membership or seek better discounts. Vertical mergers, meanwhile, help change the delivery of care and gain growth and leverage in new areas, Sharp said.

An ecosystem transformation is happening in health care, he added. And employers seem to believe that this matters to them and the health care they offer to employees.

“In the short term, it’s too early to guess if employers will truly like this deal or not and whether it will have a significant impact on them,” Sharp said. “But they actually do think that this [Aetna-CVS] deal matters.”

Aon conducted a survey on Dec. 14, 2017 regarding employers’ attitudes toward activity in the health care merger and acquisitions. Of the 450 employers surveyed, 61 percent said that as a result of the vertical mergers, they will need to change their health care strategy; and 85 percent believe that these deals will have a moderate to significant change in how people

Although a consolidation gives reason to be concerned, the CVS-Aetna merger also poses interesting opportunities, said Rob Andrews, CEO of the Health Transformation Alliance, a nonprofit group made of 47 companies whose goal is to fundamentally transform the corporate health care benefits marketplace.

A supporter of fee-for-value over fee-for-service, Andrews believes the deal could potentially be a step in the right direction to achieve that transformation. With a fee-for-service system, health care providers are motivated to sell more drugs or provide more care, regardless of its value to the patient, he said. With fee-for-value, providers make more money if the patient gets healthier and are motivated to do what’s best for the patient’s health.

“Because you will now have Aetna, which has fee-for-value medical products, aligning with CVS, which is very good at identifying and distributing high-quality pharmaceutical products, we think that opportunity exists in a way it didn’t before,” Andrews said.

Employers’ health care strategies are unlikely to budge — at least not for the 2019 plan year.

Although the merger is unlikely to have an impact on 2019 benefit plan designs, employers could make changes for the 2020 plan year, according to Kim Buckey, health compliance expert and vice president of client services at DirectPath, a Birmingham, Alabama-based health care consultancy. For example, an employer might have medical through UnitedHealthcare but drug coverage through CVS/Caremark.

“Employers’ ability to get the best deal for coverage may be hampered by these prepackaged entities,” Buckey said.

Also read: Anthem Inc.’s New PBM Predicted to Bring Cost Savings to Employers

Jaja Okigwe President and CEO, First Choice Health

Jaja Okigwe, president and CEO of First Choice Health, a Seattle-based national health care provider network, seemed skeptical of the merger’s potential to create innovation in health care. The biggest opportunity for better care and better costs is “practical, lean solutions that can be offered at your workplace,” he said.

“More than ever, we’re seeing an increase in unexpected alliances and outside industries taking a stab at health care improvement,” he said. “The fact is, health care is complex and needs to change; however, consolidation of two large, traditional companies does not automatically generate innovation.”

According to a CVS statement, the deal is subject to state regulatory approvals, but many of those have already been granted. The merger is set to close early in the fourth quarter, Bloomberg reported. Bloomberg also described the merger as “among the most significant health care mergers of the past decade.”

CVS and Aetna are targeting the retail-consumer aspect being important rather than owning hospitals, physician groups and surgery groups like UnitedHealthcare’s strategy, Aon’s Sharp said.

“Employers are saying, ‘I don’t know which one is going to win, but we’re gonna’ sit and watch and not change our strategy yet. But we’ll be poised to do it [and] see what which has the [impact] on changing behavior,’” he said.

March 26, 2014November 14, 2019

SAP Acquires Contingent Staffing Tech Firm Fieldglass

German tech firm SAP announced plans to acquire contingent staffing software maker Fieldglass. Terms of the deal, which is scheduled to close in the second quarter, were not disclosed.

Fieldglass’ cloud-based vendor management system meets the growing demand among employers to manage flexible workforces that can be quickly engaged and on-boarded to support rapidly changing business and customer needs, according to an SAP release announcing the March 26 deal.

Combined with the collaborative, network-based procurement capabilities of Ariba and the human resources expertise of SuccessFactors, the acquisition uniquely positions SAP to deliver a platform for businesses to manage their entire workforce — both temporary and permanent staff — from initial recruiting and on-boarding to ongoing development, performance management, retention and retirement, SAP said.

The combination of Fieldglass’ market-leading VMS solution with SAP promises to transform workforce management. It will enable a flexible and comprehensive approach to managing the entire workforce and life cycle, beyond the traditional focus on the employee record that characterizes many systems today, SAP said.

Contingent labor and statement-of-work services is a $3.3 trillion, high-growth market according to industry analyst estimates.

Fieldglass will continue to build out its global team and operations and retain its identity and continue to operate independently as an SAP company in its cloud line, according to a press release.