Publicly-traded Ultimate Software (NASDAQ: ULTI), a provider of cloud-based human capital management (HCM) and employee experience software, has been acquired by Hellman & Friedman for $11 billion. Other investors in the transaction include Blackstone, GIC, Canada Pension Plan Investment Board (CPPIB), and JMI Equity. This transaction was first announced on February 4, 2019.
Ultimate Software’s leading product, UltiPro, provides HR, payroll, talent, and time and labor management services and is sold on a subscription basis per employee. The company has approximately 51 million people records in the cloud and 6,100 customers worldwide including Bloomin’ Brands, Culligan International, Feeding America, First Horizon National Corporation, Red Roof Inn, SUBWAY, Texas Roadhouse, and Yamaha Corporation of America. Ultimate Software was founded in 1990 and is headquartered in Weston, FL (www.ultimatesoftware.com).
In 2018, Ultimate Software had revenues of $1.1 billion and EBITDA of $133 million. For the twelve months ending March 31, 2019 revenue was $1.2 billion and EBITDA was $125 million. In 2017, revenue was $941 million and EBITDA was $79 million. Based on these numbers the valuation multiple for this transaction was 9.2x TTM revenues and 88x TTM EBITDA. Industry-wide, revenues in the human resources software sector are growing at approximately 10 percent per year.
Under Hellman & Friedman ownership, Ultimate will continue to operate under the leadership of CEO and founder Scott Scherr and its existing senior management team. “As a privately funded company, we now have increased ability to make long-term investment decisions that will benefit our customers, while still putting our people first—always,” said Mr. Scherr. “We have continuously evolved as a business since we started 29 years ago and going private gives us the flexibility, resources, and freedom needed to continue that momentum as we grow the best culture, products, and services in the market.”
Hellman & Friedman invests from $300 million to $1 billion in companies across a range of industries including financial services, business & information services, software, healthcare, internet & media, retail & consumer, and industrials & energy. Hellman & Friedman was founded in 1984 and is based in San Francisco with additional offices in London and New York (www.hf.com).
Blackstone’s investment activities include private equity, real estate, public debt and equity, non-investment grade credit, real assets, and secondary funds. The firm also provides financial advisory services, including financial and strategic advisory, restructuring and reorganization advisory, and fund placement services. Blackstone (NYSE: BX) is headquartered in New York (www.blackstone.com).
GIC was founded in 1981 as a sovereign wealth fund to manage Singapore’s foreign reserves. GIC is headquartered in Singapore with a network of offices in nine cities worldwide (www.gic.com.sg).
The Canada Pension Plan Investment Board (CPPIB) invests in public equities, private equities, real estate, inflation-linked bonds, infrastructure, and fixed income instruments. Net assets under management in December 2018 were C$368 billion. CPPIB is headquartered in Toronto, with offices in London, Hong Kong, New York, Hong Kong, Sydney, Sao Paulo, Mumbai, and Luxembourg (www.cppib.ca).
JMI Equity is an active investor in the software sector. In December 2018, it closed JMI Equity Fund IX LP at its $1.2 billion hard cap. JMI Equity was founded in 1992 and has offices in San Diego and Baltimore (www.jmi.com).
Goldman Sachs & Co. (www.goldman.com) was the financial advisor to Ultimate. Qatalyst Partners (www.qatalyst.com) was the financial advisor to the investor group.
© 2019 Private Equity Professional | May 6, 2019
