H&F says HR software is worth $11B

The mega-deal seems to be making a comeback. In the latest example, a group of private equity powerhouses led by Hellman & Friedman has agreed to acquire Ultimate Software, a creator of human capital management software, for about $11 billion, taking the company private off the NASDAQ. The price of $331.50 per share represents a 19.3% premium to Ultimate’s close last Friday. Blackstone, GIC, the Canada Pension Plan Investment Board and JMI Equity will also invest in the deal.

Only a handful of buyouts worth $10 billion or more have occurred in the US since the end of the financial crisis, including industry-shaping moves like Silver Lake‘s takeover of Dell Technologies in 2013 and their ensuing add-on of EMC. Such takeovers have grown more frequent in recent months, though, with the acquisitions of Dr Pepper Snapple and Refinitiv (formerly the financial and risk unit of Thomson Reuters) serving as examples from 2018.

To expand the scope a bit, the frequency of $1 billion buyouts in the US has also been clearly trending upward ever since the financial crisis, per the PitchBook Platform, with last year’s total of 78 such deals representing a post-2007 high. Here’s a full accounting:

Who knows what the future will hold. But that’s just one of several ways in which the global financial picture is beginning to look more and more like the lead-up to the last crisis, with mounting leverage and contracting liquidity representing two other prominent examples.

It could be that the recent rise in billion-dollar buyouts is simply due to more available targets for such deals. Where are those targets coming from? Like Ultimate, a large portion are from the software space, a maturing industry that’s seen ever-increasing levels of private equity attention in the past decade. The software companies that sparked a boom in VC over the past 20 years aren’t startups any longer.

For its part, Florida-based Ultimate was founded in 1990 and has been publicly traded since 1998. The company has seen its stock price climb steadily upward in recent years, going from below $120 per share in the early days of 2014 to its current lofty standing above $300 per share. Clients including Subway, Red Roof Inn and Yamaha use Ultimate’s software to manage HR, payroll, talent and other aspects of employee relations.