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    Two heavyweights of the HCM and workforce management industry, Kronos Inc and Ultimate Software Group have announced plans to merge. The merger creates a single company with an annual revenue of around $3bn, and an enterprise value of $22bn. The definitive merger agreement to create one of the world’s largest cloud companies was announced earlier this week. The all-stock transaction has been unanimously approved by both boards of directors and is expected to close at the end of March 2020.

    Kronos and Ultimate software share similar corporate credentials. Since 2019 both companies have been owned by the same private equity-led consortium and have similar staff headcount. They both enjoy comparable market strength in U.S and Canadian markets and have similar target markets and geographical reach. Hellman & Friedman will remain the controlling shareholder of the combined company. Blackstone will be the largest minority investor, followed by GIC, the Canada Pension Plan Investment Board and JMI Equity.

    The company will have over 22,000 direct customers worldwide, and another 24,000 through reseller routes. The combined company CEO and Chairman, Aron Ain (long standing Kronos CEO) and his transition executives will have to work hard to tackle the inevitable uncertainty that the announcement brings. Ain believes “with a combined 70 years in business, we are poised for tremendous success. For our employees, customers, and partners there is an even better future ahead. Our top priority as we complete this merger is to ensure a smooth transition for our people and continue to exceed our customers’ expectations.”

    Inevitable questions taxing customers and industry analysts include what does the future hold for the various product lines, and their product architecture? Some products are cloud based, whilst others operate on-premise. Many products enjoy a complementarity (with revenue boosting cross selling potential) but several products compete and overlap and will be vulnerable in a harmonised product portfolio. The merger announcement ( found here ) states  “the new company will bring together the best of each company’s award-winning solutions” but further detail is conspicuous by its absence. Key decisions in the medium term will be which HCM solutions will be sold into each of the very-large, mid size and small customer categories. Likewise, which products will be the focus of R&D going forward, and which could stagnate?

    Industry speculation is already alight, with wildly differing opinions and projections.

    Trevor White, analyst with Nucleus Research Inc. suggests that Ultimate Software’s UltiPro rather than Kronos’ products are likely to be the main focus going forward. “This merger is a play for Kronos’s user-base,” White told Silicon ANGLE. “It’s basically saying to Kronos customers that when it comes time to upgrade, they should be going with Ultimate. From an end-user perspective, Kronos is dead – or, at the most, set to become an UltiPro Light, as there is no reason for there to be any investment into the product anymore.”

    Holger Mueller, analyst at Constellation Research Inc holds a very different view. “If you lined up Kronos and Ultimate up like race cars starting five years ago — competing on who rebuilds products faster — Kronos has clearly won, ” He goes onto say “With Kronos Workforce Dimensions, Kronos has delivered a masterpiece of product development work. Ultimate, on the other hand, has delivered good but industry-average progress.”

    Other analysts project that existing customers who have invested in software should expect their software investment to be secure for some time to come. Customers operating globally should see the product footprint grow internationally in the medium term and provide more of a single firm solution. Other emerging questions around future strategic direction and possible fears around consolidation have been partly answered.  A Kronos spokesperson commented that the “Deal is one of growth not efficiency.” This is substantiated by the news that 3,000 new staff will be employed over the next 3 years. Many of these new roles will be overseas to boost international product development and sales.

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    Analysts disagree how existing Kronos and Ultimate Software customers will be impacted by recent merger

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