Kronos Says Acquisitions Ahead to Ramp Up Revenue

Boston Business Journal
By Jackie Noblett
March 20, 2008

Seeking to capitalize on the human resource demands of booming global economies, Kronos Inc. has undertaken a rapid global expansion plan that includes aggressively acquiring several companies. The world's third largest human capital management software company is looking at solidifying its market position and generating new streams of revenue by buying companies that fill its gaps.

"Acquisitions in Europe and other areas is definitely a strategy," said Jim Kizielewicz, senior vice president of corporate strategy and chief marketing officer at Kronos. "We want to enhance our product offerings, and the companies we've acquired have customer bases around the globe."

The company, which posted $668 million in revenue last year, has gobbled up several small niche companies, including Belgium's Captor in June, and signed agreements with others, such as Spanish human capital management software company Meta4 SA in April.

Kronos has also grown globally organically, opening offices in Shanghai and Mumbai, India, in January to complement three other offices in Asia.

Kronos' software is targeted to large companies in the retail, manufacturing and health care sectors to manage hourly employees.

While more than 80 percent of its revenue comes from the United States, the company now has customers in more than 60 countries. Kronos executives say they would like to see its global revenue grow to 30 percent or more.

Kizielewicz said acquisitions will continue to be a major source of global expansion, as the fragmented nature of global markets makes it easier to buy companies with knowledge of local labor regulations instead of spending months learning the specifics independently.

Analysts say the strategy is key to Kronos' long-term growth.

"Kronos has gotten to where they are by just focusing on workforce management," said Christa Degnan Manning of AiVIR Research Inc. "The opportunity for them globally just in their core area of expertise is just huge."

AMR estimates the global human capital management market to be about $6 million.

The acquisitions have also been targeted at expanding the company’s offerings beyond payroll and time clock management.

Its purchase of Newton-based Deploy Solutions in October and Oregon's Unicrew Inc. in 2006 gave it a 'Acquisitions in Europe and other areas is definitely a strategy. We want to enhance our product offerings, and the companies we've acquired have customer bases around the globe.' Jim Kizielewicz Senior vice president of corporate strategy and chief marketing officer. Kronos Inc. foothold in the scheduling functions of workforce management. The company also sells software for such HR functions as hiring and employee performance.

Kronos' status as a privately held company has fueled the acquisition strategy. In June the then-public company was acquired by private equity firm Heilman & Friedman LLC for $1.8 billion, relieving the pressure of appeasing Wall Street.

Before the takeover, the company's profit grew at about 15 percent per year. Since then, Kizielewicz said the company has focused on making large investments.

Analysts say Kronos would not be able to make the moves without private backing.

"The investment they've made globally as well as product footprint have required a pretty level investment that Wall Street would not tolerate," Manning said.

But Manning said the expansion may make them an acquisition targeted by some of the largest players in workforce software — Oracle Corp. (Nasdaq: ORCL) and SAP AG (NYSE: SAP). Kronos entertained such offers before being taken private, but executives decided the private route would be the best way for Kronos to grow, Manning said.

A company spokesman declined to comment on whether being acquired is likely.