NAPEO
March 2020
THIS MONTH'S FOCUS: Mergers & Acquisitions
PEO SELLERS: THE IMPORTANCE OF SELF-DUE DILIGENCE
There is no easy approach to selling a business and no two transactions are ever the same. Buyer appetites, legal frameworks, industry cycles, and macroeconomic conditions are in constant flux, making the idea of selling a daunting one. The silver lining: Successful transactions happen all the time, provided sellers take the necessary steps to prepare early and prepare well. Preparing involves mental preparation as well as a functional preparedness. The functional preparedness is a form of seller due diligence, asking yourself the tough questions that a buyer might ask, and then being prepared to support your answers. Let’s explore the process.
BY NEAL ENGLAND
March 2020CONTENTS
FEATURED
BUYERS: FINDING THE HIDDEN GEMS
Too many times, buyers go out looking for acquisitions for the wrong reasons. While the financials may look good on the surface, the acquirer may soon find out that operationally, the company is a disaster. A purchase that was intended to be accretive to earnings—the star horse in the stable—turns into a pig in the mud, thwarting the growth and profitability goals of the buyer.
BY JOE RAYMOND
March 2020HOW TO DEVELOP A COMMUNICATIONS PLAN
The development of a post-acquisition communication plan is one of the most critical aspects of selling or purchasing a PEO. Without a well-executed communication plan, the company can lose clients, employees, partners, and vendors, which would be devastating to both buyer and seller. The development, implementation, and execution of an effective communication plan is crucial, particularly due to the number of moving parts that must be addressed.
BY ZACH COLLIER
March 2020INTEGRATING CULTURES & TECHNOLOGY
Months have passed as you worked through the due diligence, negotiation, and legal aspects to finalize an acquisition, and your team is ready to take a deep breath and relax. The reality is, however, that the hard work has just begun; the integration of service models, technology, accounting, treasury, insurance programs, staff, and culture is now a priority. These steps take time and work and always come with some surprises. For this article, I will focus on culture and technology from the buyer’s perspective, although sellers can use this as a blueprint for what will happen and why.
BY TED A. CRAWFORD
March 2020WHAT I LOOK FOR IN A BUYER
When I was initially introduced to the PEO industry in 1994, it was a very different place with a very different business model. Since that time, the industry has gone through an evolution that has transformed the value proposition of the PEO into, what I believe, is a much better service offering.At the same time, I have also watched the way the investment community views the PEO service model over several business cycles. It has gone from an almost euphoric high-water mark to an unrealistically low level, depending upon how the equity and public markets view the overall economic condition along with the value proposition of the PEO industry.
BY ABRAM FINKELSTEIN
March 2020TRACKS
While I was having a conversation with a friend the other day about my upcoming travel plans, a consistent theme developed. As I reviewed each destination, I kept mentioning that I must make plans with a NAPEO member for dinner. The friend jokingly asked, “Do you really have a NAPEO friend in every state?” Almost. I started counting. Illinois, California, Texas, Oklahoma, Louisiana, Florida, South Carolina, North Carolina, Alabama, Virginia, Maryland, Massachusetts, Arizona, Indiana, Ohio, Michigan, Wisconsin, Utah, and even Hawaii (and I am sure that I missed a few).
BY ANDREW LUBASH
March 2020A DEEP DIVE INTO WORKERS’ COMP STATS
Over the past decade, the workers’ compensation (WC) industry experienced the quintessential highs and lows of a market cycle. The goal of this article is to share and discuss recent trends in both the WC and PEO WC space sand provide thoughts on the direction of the market over the next year. We will wrap up the article by sharing some ideas that PEO leadership and risk management professionals can consider to prepare themselves for the more challenging times that will inevitably come.
BY FRANK HUANG
March 2020BUILDING THE RIGHT TEAM FOR THE RIGHT PEOPLE
Even though many PEOs share much in common and might look the same from the outside, no two PEOs are built the same way. It might be a unique service offering or a niche client base that distinguishes one PEO from another. For Burlington, Massachusetts–based Genesis HR Solutions, it’s the company’s management structure. Bob Burbidge founded the company in 1991 and still serves as CEO, but his top two executives share the role of co-president. Patty Hilger and Diane Stevenson were promoted to the role in 2014 when Burbidge recognized that the time had come to hand over day-to-day operations.
BY CHRIS CHANEY
March 2020As I write this, our renewal period has officially ended, and I’m happy to say that as of this moment, we’re at 97 percent of our budgeted renewal revenue. The remaining 3 percent—and more—will come in over the next few weeks, as always. We are seeing impressive growth among most of our members, ranging from a little to a lot. The 941s that you file with us are confidential, so I can’t be too specific, but I can tell you that we continue to see a growing industry—and growing member companies.
BY PAT CLEARY
March 2020EMPLOYEE STOCK OWNERSHIP PLANS & PEOS
Some PEOs wonder about the implications when a client employer has established an employee stock ownership plan, or ESOP, for its bona fide common-law employees. There is certainly no harm in being cautious. Employee Retirement Income Security Act (ERISA) lawyers will be the first to tell you that there has been a significant amount of litigation related to the alleged mismanagement of ESOPs, and any PEO would quite naturally not want to get caught up in needless legal disputes.
BY MALCOLM SLEE, ESQ., JOHN BARLOW, ESQ., AND SETH PERRETTA, ESQ.
March 2020HELPING CLIENTS DEAL WITH ICE VISITS
When Immigration and Customs Enforcement (ICE) comes knocking on a client’s door, it can be an intimidating event. Under the Trump administration, onsite investigations have increased exponentially, with ICE initiating 6,848 worksite investigations, 5,981 I-9 audits, 779 criminal arrests, and 1,525 administrative arrests in Fiscal Year 2018 alone. Although employers may want to refuse entry to ICE officials, employers must allow the officials to conduct their business, albeit in accordance with employers’ rights.
BY TODD J. KAISER, ESQ., CURTIS Y. CHOW, ESQ., AND JEFFREY W. PARKER, JR., ESQ.
March 2020MILD GROWTH FORECAST FOR 2020
Most PEOs showed increased revenue in the fourth quarter of 2019, according to NAPEO’s Pulse Survey, though the extent of growth was the lowest in the study’s history.
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March 2020THE POWER OF MANY
In September 2019, NAPEO gathered in Austin, Texas, for its Annual Conference & Marketplace. It was a remarkable conference in many ways, but the most remarkable was the astoundingly successful kickoff of the NAPEO Gives Back initiative.
BY BARRON L. GUSS
March 2020Trends, Stats, News
TRENDS WHERE IS HR GOING IN 2020? The HR Trend Institute, founded in 2014, has been following human resources trends and publishing reports for the past five years. For 2020, here are some of the trends it predicts will unfold: • Holistic HR, using technology and being more human-centric; • Working more closely with employees to find their needs rather than focusing on improving the process...
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March 2020WHAT I’VE LEARNED ABOUT WORKING WITH BROKERS
While there are many pros and cons of working with independent agents to fill up your sales pipeline, PEOs of all sizes are harnessing this rapidly growing channel to fuel growth. Of the many shapes and forms an independent agent takes, I’ve had the most success with one segment: property and casualty agents and brokers (i.e., brokers).
BY VIC TANON
March 2020