Gevity - Trinet Merger Acquisition
Gevity Acquired by TriNet for $98 million

On March 5, 2009 Bradenton Florida based Gevity Inc has announced it has reached an agreement to be acquired by San Leandro California based TriNet for $98 million.  The shareholders have not yet approved the deal.  Gevity traded as high as $30 per share as recently as 2006.

About Gevity

Originally founded in the 1980s Gevity was formerly known as Staff Leasing Inc and for many years was the largest Professional Employer Organizations in Florida and one of the largest in the nation. Staff Leasing was originally founded by Bill Mullis of Bradenton and other local businessmen. Mr. Mullis and his group sold their interest to a private venture capital led by investor Charlie Craig in 1993. Mr. Craig elected Lehman Brothers to do the IPO and the stock opened at $17 in March of 1997. Staff Leasing at the time grew in Florida largely due to it’s favorable workers’ compensation arrangement with Liberty Mutual and its compelling business services model for other small businesses. Staff Leasing’s primary markets in the 1990s were construction related clients. When the work comp insurance markets softened Gevity transformed itself into a more compelling service for a broad range of target clients by offering access to group health insurance plans in addition to a large suite of HR related services. Gevity’s worksite employee count has been as high as 140,000 in the late 1990s and was 107,000 as of mid 2008. Gevity has seen a long history of senior management changes and has struggled to maintain consistent executive leadership. Most recently Michael Lavington CEO has brought Gevity back to a co-employment PEO services model after ill fated foreys into alternate HR outsourcing services models such as Administrative Services Organizations (ASO) with the acquisition of several HR outsourcing companies with non-coemployment services models. Gevity attempted to expand the ASO services through a separate product branding known as Gevity Edge Select. The ASO product was the brain-child of former CEO Erik Vonk who departed Gevity in October 2007. Vonk attempted to reposition the Gevity service as “Human Capital Management” and move the terminology away from PEO (Professional Employer Organization) and employee leasing. Vonk’s business plan to attempt to offer services with out group workers comp and health insurance caused many clients to leave and sales to suffer. The Gevity sales was widely regarded as confused about how to sell the rebranded products and sales suffered ultimately resulting in Vonk’s departure. Under the leadership of Lavington, Gevity has regained its focus and this has allowed its sales force to succeed. Visit this link for more history on Gevity.

Trinet was founded by former CEO Martin Babinec in 1988 in San Leandro California and has always been privately held. Information on the current client count and worksite employee size has not been released by the company. Trinet Group is privately held and filed a registration statement with the SEC in August of 2000.

Trinet and Gevity - Merger or Acquisition?

As of March 18, 2009, the Gevity website describes a merger with Trinet. The Trinet website describes the acquisition of Gevity. Trinet is believed to be roughly 35,000 worksite employees and Gevity is over 100,000. This makes Gevity approximately 3 times the size of Trinet. According to the the website of General Atlantic Partners, they are the major investor in Trinet. General Atlanitc Partners is also a major stockholder in Gevity with current ownership at 9.5%. A full analysis of the compelling financial scenario for General Atlantic Partners was described by Ben Graham at seeking Alpha in January 2009.

What’s next for Gevity?

What happens to Gevity clients and internal employees remains to be seen. From a Wall-street financial point of view, Trinet with General Atlantic Partners is buying Gevity and Gevity will cease to be a public company. Many PEO industry experts have lamented the disadvantages of being a public company in the PEO industry. SEC filings and Sarbanes Oxley have required public companies to expose weaknesses that non-public competitors have used for competitive advantage in the PEO marketplace. In addition, websites like the Yahoo finance message board (tracking only public companies) became hotbed of rumor and misinformation that was sometimes used by competitors to torpedo Gevity when competing for an account. This has sometimes been a disadvantage for Gevity and as a private company, they will remove this exposure.

Trinet and Gevity - Turf and Target Markets Overlap and Distinctions

Trinet has traditionally pursued accounts that are high wage, high tech and located primarily in California and New England. Gevity has traditionally focused on blue and gray collar accounts in Florida, the Southeast and Texas. Gevity has been trying to grow in California so the Trinet merger is a minor market overlap there. The Gevity brand may remain viable and may continue to be marketed to moderate work comp risk accounts in the Southeast and Texas.

HRMS and Payroll Processing

Although Trinet has a highly regarded IT – services platform using the Oracle owned PeopleSoft products, Gevity also has a strong IT infrastructure with Oracle HRMS platform. In addition Gevity has the IT infrastructure and processing horsepower to run payrolls for 3 times the number of employees currently being serviced on the Trinet PeopleSoft system. TriNet has indicated on their website that the merger would provide a redundant cross- country platform to help offset disaster recovery, earthquakes in California (Trinet in the SF bay Area) and Gevity with hurricanes in Florida. Both companies are considered leaders in the use of technology for their PEO service platforms.

In our opinion, the Gevity Acquisition was a practical way for General Atlantic Partners to increase their stake in the PEO industry and have the resulting entity as a private company. In addition, they got Gevity at a good price. Whether General Atlantic Partners retains Gevity as a separate marketing and financial entity to be later sold remains to be seen.

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