Ultimate Software to Buy PeopleDoc, Expands Europe Presence

A generic image of a pen on top of a stock chart. Credit: Shutterstock photo

The Ultimate Software Group, Inc.ULTI recently inked a binding Letter of Intent ("LOI") with the shareholders of PeopleDoc. The company plans to acquire PeopleDoc for $300 million. Further, the company aims to finance the acquisition of Paris, France-based PeopleDoc in combination of both cash and common shares.

Weston, FL-based Ultimate Software envisions the deal to conclude by the third quarter of 2018, after clearing the customary regulations. Further, the human capital management (HCM) software solutions provider anticipates the buyout to not have any significant impact on its total revenues for fiscal 2018.

Ultimate Software is benefiting from the robust adoption of its flagship Software-as-a-Solution ("SaaS") solution, UltiPro HCM product suite. The company's cloud-based business model and expanding product portfolio are positives.

The compatibility of the business lines is a key catalyst. Both Ultimate Software and PeopleDoc are engaged in similar operations with the broader perspective aimed at improving employee experience.

"It's rare to encounter another organization that is such a complementary fit in philosophy, culture, and technology," said Adam Rogers, chief technology officer at Ultimate Software.

Notably, the stock gained almost 1%, following the news. The shares of Ultimate Software have returned 30.4% year to date, substantially outperforming the industry 's rally of 22.3%.

Focal Points of the Acquisition

PeopleDoc was founded in 2017 and boasts of more than 1K customers across 180 countries.The company's end-to-end "HR Service Delivery" platform allows HR institutions to cater to employees requirements on a real-time basis. The innovative capability of the platform has made Ultimate Software bid for the company. Post the buyout, PeopleDoc's "HR Service Delivery" capabilities will strengthen Ultimate Software's "people-centric" offerings.

Regarding PeopleDoc's flagship solution of HR Service Delivery, Rogers remarked, "The unique technology solutions they've developed will allow our customers to take better care of their employees, which we believe is the single most important ingredient in long-term business success."

Employee engagement is anticipated to increase with the addition of new features, including the likes ofHR case management, online employee help center, employee file management, among others. PeopleDoc's expertise also extends to automating employee processes, managing document acknowledgement, storage, and compliance.

Post the buyout, PeopleDoc will continue its operations independently. Ultimate Software's customers will be able to avail selected HR Service Delivery features from January 2019, as a part of UltiPro HCM suite. Consequently, the users will be empowered with faster and a more responsive workforce support.

PeopleDoc has more than 265 employees, with offices across France, Germany, the U.K., Finland, the Netherlands, Canada, and the United States. Regarding the broader perspective of expanding foothold into Europe markets, Ultimate Software's CEO, president, and founder, Scott Scherr said, "This acquisition will open doors for Ultimate to further expand our presence in international markets."

Furthermore, the company intends to accelerate research and development pertaining to HR Service Delivery, in its Paris innovation hub, providing customers with ideal workplaces.

Cash Position

Ultimate Software ended first quarter of fiscal 2018 with cash, cash equivalents, and marketable securities of $147.9 million down from $165.1 million in the end of previous quarter.

The cash balance enables the company to explore growth avenues and sustain the competitive position in the market.

Bottom Line

Ultimate Software's previous acquisitions have aided growth by expanding its product portfolio and adding competence. For instance, in September 2016, the company acquired Kanjoya. A cloud workforce intelligence provider for enterprises, Kanjoya enabled the company to introduce UltiPro Perception.

Considering the business line of both the entities, this acquisition holds promise. We believe PeopleDoc's capabilities will enhance UltiPro offering significantly. The company's move is encouraging and augurs well for the future.

Zacks Rank & Key Picks

Ultimate Software carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Micron Technology Inc. MU , Intel INTC and Mellanox Technologies, Ltd. MLNX , each currently flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

The projected long-term earnings growth rate for Micron, Intel and Mellanox are 8.2%, 8.4%, and 15%, respectively.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

The Ultimate Software Group, Inc. (ULTI): Free Stock Analysis Report

Mellanox Technologies, Ltd. (MLNX): Free Stock Analysis Report

Intel Corporation (INTC): Free Stock Analysis Report

Micron Technology, Inc. (MU): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.