The human capital management (HCM) technology market is a hotbed of M&A activity, so to anyone who follows it, this merger shouldn’t be a huge surprise. In fact, when private equity firm Hellman & Friedman acquired Ultimate Software around this time last year, the writing was on the wall. Kronos had already been taken private by Hellman & Friedman in 2007. Aron Ain, Kronos’ venerable CEO since 2005 and 40-year Kronos employee, will serve as the CEO of “NewCo” — the name of the combined company is TBD and will be released around deal closure, which is expected by the end of March. Key takeaways:

  • Buckle up. This is one of the largest, most significant transactions to date in HR technology. It will reshape your future-of-work technology landscape — even if you’re not a Kronos or Ultimate customer. With ~$3B in combined revenues and 12,000-plus employees worldwide, the new organization will be a juggernaut in the HCM space. Beyond Kronos and Ultimate products, ripple effects to your HCM product portfolio will be measured in years. For example, Kronos has key partnerships with ADP and SAP SuccessFactors. Kronos and Ultimate have stated that they expect to maintain their partnerships. However, the other vendors may not feel the same. This will undoubtedly increase competitive pressure and shake up partnerships.

 

  • Prescription for Kronos and Ultimate customers in shock: “Don’t move, and apply pressure.” Kronos and Ultimate have complimentary product portfolios. Kronos has been a long-standing vendor for workforce management solutions with some HCM capabilities. Ultimate is well known for its broad HCM capabilities, with some workforce management capabilities. Ultimate customers should see new ways to acquire and leverage Kronos’ workforce management capabilities. Kronos customers (especially those based in North America), should rethink their broader HCM technology transformation with the addition of Ultimate’s HCM capabilities. To gain as this merger unfolds, continue to apply pressure to Ultimate and Kronos. Ask your account teams for clear, frequent updates around product portfolios rationalization, sales, service and support, and integration plans. Now is the time for your voice to be heard. (Ideally, they will ask you what you want most and prioritize your input, providing broad customer updates early and often.)

 

  • Product rationalization and realignment will fuel global, and midmarket, HCM expansion. Kronos has a good footprint both in vertical industries and globally. Ultimate has been focused in North America (notwithstanding its acquisition of PeopleDoc in 2018 — based in Paris, PeopleDoc added HR service delivery capabilities and a European foothold for Ultimate). According to Kronos and Ultimate, there is <2% customer overlap, with ~400 customers shared between their combined 22,900 customers. This will be an immediate selling focus for NewCo with existing products. Longer-term, we expect NewCo will focus on two primary product lines: Workforce Dimensions for workforce management and UltiPro for HCM. We expect Workforce Ready (Kronos’ small- to medium-sized business [SMB]/midmarket HCM solution) to supplement and support SMB/midmarket customer needs.

 

Naturally, this is the very early days of the merger. Stay in touch as this unfolds. 2020 is shaping up to be yet another dynamic year for the future of work and HCM technology. In other news, Betterworks acquired Hyphen, WorkJam acquired Forge, and iCIMS named former Marketo and SAP executive Steve Lucas as CEO. Welcome to the Roaring 20s.