Next in our “How did they get here” series, I take a look at ADP, perhaps the most acquisitive organization in the payroll / HR / benefits space. As such, I certainly cannot begin to recount all of the activity that got ADP where it is in this space. I will however try to hit the highlights.
First, however, to give an idea of how ADP seems to buy up everything in sight, look at these acquisition figures. These are the totals spent each year on acquisitions:
1998 – $351 million
1999 – $107 million
2000 – $200 million
2001 – $ 75 million
2002 – $232 million
2003 – $270 million
2004 – $270 million
2005 – $422 million
Now granted, some of these acquisitions fall outside of the HR space (they have a line of service called Dealer Services, for example), but you get the idea. In fact, the 2002 Annual Report had this to say:
“You can expect us to increase our acquisition activity even further, as we look to supplement our internal growth with strategic acquisitions that extend our markets and add applications to our product sets.”
And look at this quote from the 2005 report:
“We will increase our emphasis on acquisitions, including a focus on transactions larger than our historical experience and entry into adjacent markets where we bring some important synergies.”
Did I read that right? Even LARGER acquisitions to come? Hmmmmmm.
Anway, here is a chronological listing of some of the acquisition highlights with a brief description of the importance as I see it. Taken together, we can definitely see that this is how ADP got to where it is today. (Note there is a gap between announce dates and close dates, so there can be some discrepancy in the years of each of the activities below)
- 1992 Acquires PeopleSoft 3.0 source code. This agreement provides ADP with a perpetual license to use internally, to modify and to sublicense to its clients and prospects Release 3.0 of PeopleSoft HRMS and PeopleTools on the Centura SQLBase (OS/2) and Oracle environments. Believe it or not, the purchase price for the rights was only $22 million. This became the base of what is now the Enterprise system, ADP’s platform for all things HRMS.
- 1994 ADP acquires the Application Group which provides ADP with an implementation arm with a deep understanding of PeopleSoft.
- 1995 ADP acquires Williams, Thatcher, Rand, a New York based boutique actuarial and benefits consulting and administration firm. This begins ADP’s dive into the benefits administration arena.
- 1996 ADP Acquires Health Benefits America (HBA), a Salt Lake City based benefits administration firm specializing in large company custom services.
- 1997 Acquires the payroll business of Royal Bank of Canada and Scotia Bank – an important step in becoming a global provider. Acquired Staff Management Services of Florida and renamed it TotalSource, establishing ADP as a player in the PEO space.
- 1998 Acquired Mercers administrative business in 401(k) and Benefits administration, expanding on the base created by WTR and HBA.
- 1999 Acquired Vincam, a Miami based PEO, vaulting ADP to the second largest PEO in the country. Acquired the administrative business of J&K/KVI, securing some very large benefits administration clients in the process.
- 2000 Acquired NetBoa, an Atlanta based COBRA administration company, expanding its benefits capabilities significantly.
- 2002 Acquired Avert, a pre-employment background verification firm. ADP is continuing its expansion of end to end services from hire to off boarding.
- 2003 Acquired ProBusiness which some say removed its only competition in the large employer payroll market. Ceridian would, of course, disagree with that statement. Acquires Scudder’s 401(k) business.
- 2006 Acquired Virtual Edge, further expanding its pre-employment services. Already, it has replaced the previous recruitment services its salespeople have in their sales bag. Acquired Employease, expanding web based capabilities in the middle market space.
The journey for ADP has been interesting to say the least. What you see here is just a portion of the activity. Feel free to add to the list. One thing is clear: it’s been a very different path from the one we saw last week when looking at Hewitt. It has certainly presented its own set of challenges as ADP has had to integrate substantially different cultures, services and systems platforms over the years. It hasn’t always been pretty, but ADP is in the estimation of many the true leader in the field right now.
About the author – Donald Glade is President and Founder of Sourcing Analytics, Inc., an independent consulting firm specializing in helping companies optimize their HR / benefits / payroll service partnerships through relationship management, financial analysis, and process improvement.