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Alight named by Fortune as one of the ‘100 Best Companies to Work For’ in 2024
 1. Home
 2. About
 3. Newsroom
 4. Alight Announces Agreement To Sell Payroll and Professional Services
    Business for Up To $1.2 Billion

--------------------------------------------------------------------------------


ALIGHT ANNOUNCES AGREEMENT TO SELL PAYROLL AND PROFESSIONAL SERVICES BUSINESS
FOR UP TO $1.2 BILLION

Lincolnshire, Ill. Mar 20, 2024 | 11 minute read

 * 
 * 
 * 
 * 


MEDIA CONTACT

Mariana Fischbach
mariana.fischbach@alight.com

– Accelerates Transformation Toward Simplified and Focused Platform Company for
Employee Wellbeing and Benefits –

– At Closing, Recurring Revenue to Increase From 84% to Over 90% and Margin
Profile to Improve by Nearly 300 Basis Points –

– Raises Mid-Term Adjusted EBITDA Margin Guidance to 28% –

– New Commercial Partnership with the Divested Company –

– Expect to Reduce Net Leverage Ratio to Below Three Times –

– Increased Stock Repurchase Program by $200 Million –

– Company to Host Webcast to Discuss Transaction at 10:00 a.m. ET –

Alight, Inc. (NYSE: ALIT), a leading cloud-based human capital technology and
services provider, today announced that it has signed a definitive agreement to
sell its Professional Services segment and its Payroll & HCM Outsourcing
businesses within the Employer Solutions segment (the “Payroll & Professional
Services business”) to an affiliate of H.I.G. Capital for up to $1.2 billion,
subject to certain adjustments. This values the Payroll & Professional Services
business at a multiple of approximately 10 times its estimated 2023 adjusted
EBITDA and 24 times its estimated unlevered free cash flow.

Following the transaction, Alight and the Payroll & Professional Services
business will establish a commercial partnership to bolster their collective
competitiveness, coupling world-class service capabilities with a compelling
value proposition for clients.

The transaction is a pivotal step, accelerating Alight’s evolution into a more
simplified and focused employee wellbeing and benefits platform company. The
Alight Worklife® platform is optimally positioned to help clients enhance
employee engagement and achieve cost savings through advanced solutions. By
concentrating resources on strengthening its platform, service capabilities, and
go-to-market strategy, Alight will be even better positioned to drive improved
cost, experience and productivity outcomes for its clients.

Throughout its transformation, Alight has delivered strong growth while building
a robust pipeline and record backlog of revenue under contract. Alight’s focus
over the last four years around standardization, automation, and Cloud migration
has significantly enhanced the margin profile of the remaining core business. As
a result, Alight will achieve nearly 300 basis points of adjusted EBITDA margin
expansion upon deal closing. Additionally, the Company is increasing its
mid-term adjusted EBITDA margin target to 28%, which would mark a total of 600
basis points of potential margin expansion versus 2023. Alight also expects to
accelerate the achievement of other mid-term financial objectives including
higher cash generation and a de-levered balance sheet with net leverage ratio
expected to be below three times. This will enable continued strategic
investment in the business and the return of excess capital to shareholders.

“This strategic transaction results in a more agile Alight and enhances our
competitiveness as we strengthen our technology and services value proposition,”
said Chief Executive Officer, Stephan Scholl. “Coupling our strategic
partnership with the Payroll & Professional Services business alongside our
strong benefits business, delivery capabilities, data analytics, and artificial
intelligence will ensure prospective and new clients remain on the frontier for
wellbeing and benefits solutions. With today’s announcement, we believe the
stage is set for Alight to unlock the power of its platform transformation and
deliver world-class, innovative solutions that improve client outcomes and
enhance shareholder value.”

“We are excited to partner with H.I.G. to establish a standalone global leader
in payroll and professional services. By focusing our investments and energy on
enhancing our highly differentiated, end-to-end technology and service
capabilities, we will be able to add significant incremental value for our
clients. With H.I.G.’s support, expertise, and resources, as well as our
continued commercial partnership with Alight, we are well-positioned as the
partner of choice for global enterprises,” said Luca Saracino, Head of the
Payroll and Professional Services business.

“We are thrilled to partner with Luca and the entire Payroll & Professional
Services team,” commented Matt Lozow, Managing Director at H.I.G. “As businesses
grow increasingly global and face complex technology and compliance
requirements, we believe that the Payroll & Professional Services business is
uniquely positioned to help clients address the many challenges which this
creates. We see a tremendous opportunity for continued growth and look forward
to working with the team to build upon their success and leadership position in
the market.”

Transaction Details

Pursuant to the terms of the agreement, an affiliate of H.I.G. Capital will
acquire Alight’s Payroll & HCM Outsourcing businesses within the Employer
Solutions segment which offer North American payroll services, global payroll
services, and HCM outsourcing services and Alight’s Professional Services
segment, which offers application management and cloud deployment support for
Workday, SAP and Oracle.

The sale represents a transaction value of up to $1.2 billion, in the form of $1
billion in cash and up to $200 million in seller notes, of which $150 million is
contingent upon the Payroll & Professional Services business’ 2025 financial
performance. Alight expects to use the net after-tax cash proceeds to reduce
debt, return capital and for general corporate purposes, including reinvestment
into growth opportunities.

The transaction has been approved by Alight’s Board of Directors and is expected
to close by mid-year 2024, subject to customary closing conditions, including
regulatory approvals. The Company expects to update its full-year 2024 financial
guidance after closing.

J.P. Morgan Securities LLC served as financial advisor and Simpson Thacher &
Bartlett LLP served as legal counsel to Alight. Guggenheim Securities, LLC
served as financial advisor and Kirkland & Ellis LLP served as legal counsel to
H.I.G. Capital.

Stock Repurchase Program

Complementing its existing stock repurchase program, the Company’s Board of
Directors has authorized the repurchase of up to an additional $200 million of
the Company’s Class A common stock, providing a total amount authorized for
repurchase of $248 million after giving effect to the increase. Repurchases may
be conducted through open market purchases or privately negotiated transactions
in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as
amended, including pursuant to Rule 10b5-1 trading plans. The actual timing and
amount of future repurchases are subject to business and market conditions,
corporate and regulatory requirements, stock price, acquisition opportunities
and other factors. The stock repurchase program does not obligate Alight to
acquire any amount of common stock, and the program may be suspended or
terminated at any time by Alight at its discretion without prior notice.

Conference Call

Alight will host a webcast to discuss the transaction beginning at 10:00 a.m.
(ET) on March 20, 2024 and will post presentation materials regarding the
transaction on its website shortly prior to the webcast. Interested parties can
access the live webcast and accompanying presentation materials by logging onto
the Investor Relations section on the Company's website at
http://investor.alight.com, which will also have a replay of the conference
call.

About Alight Solutions

Alight is a leading cloud-based human capital technology and services provider
that powers confident health, wealth and wellbeing decisions for 36 million
people and dependents. Our Alight Worklife® platform combines data and analytics
with a simple, seamless user experience. Supported by our global delivery
capabilities, Alight Worklife is transforming the employee experience for people
around the world. With personalized, data-driven health, wealth, pay and
wellbeing insights, Alight brings people the security of better outcomes and
peace of mind throughout life’s big moments and most important decisions. Learn
how Alight unlocks growth for organizations of all sizes at alight.com.

About H.I.G. Capital

H.I.G. Capital is a leading global alternative investment firm with $60 billion
of capital under management.* Based in Miami, and with offices in New York,
Boston, Chicago, Dallas, Los Angeles, San Francisco, and Atlanta in the U.S., as
well as international affiliate offices in London, Hamburg, Madrid, Milan,
Paris, Bogotá, Rio de Janeiro and São Paulo, H.I.G. specializes in providing
both debt and equity capital to small and mid-sized companies, utilizing a
flexible and operationally focused/ value-added approach:

H.I.G.’s equity funds invest in management buyouts, recapitalizations, and
corporate carve-outs of both profitable as well as underperforming manufacturing
and service businesses.

H.I.G.’s debt funds invest in senior, unitranche and junior debt financing to
companies across the size spectrum, both on a primary (direct origination)
basis, as well as in the secondary markets. H.I.G. also manages a publicly
traded BDC, WhiteHorse Finance.

H.I.G.’s real estate funds invest in value-added properties, which can benefit
from improved asset management practices.

H.I.G. Infrastructure focuses on making value-add and core plus investments in
the infrastructure sector.

Since its founding in 1993, H.I.G. has invested in and managed more than 400
companies worldwide. The firm's current portfolio includes more than 100
companies with combined sales in excess of $53 billion. For more information,
please refer to the H.I.G. website at www.higcapital.com.

*Based on total capital raised by H.I.G. Capital and affiliates

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),
and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements include, but are not limited to, statements regarding the sale of our
Payroll and Professional Services business to an affiliate of H.I.G. Capital,
including the likelihood of the consummation of the transaction, the expected
time period to consummate the transaction, the anticipated benefits of the
transaction (including the achievement of our financial objectives), support
plans, opportunities, anticipated future performance (including our expected
recurring revenue and margin profile) and expected stock buyback programs, and
statements regarding our pro forma capital structure. In some cases, these
forward-looking statements can be identified by the use of words such as
“outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,”
“should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,”
“estimates,” “anticipates” or the negative version of these words or other
comparable words. Such forward-looking statements are subject to various risks
and uncertainties including, among others, risks related to declines in economic
activity in the industries, markets, and regions our clients serve, including as
a result of elevated interest rates or changes in monetary and fiscal policies,
competition in our industry, risks related to the performance of our information
technology systems and networks, risks related to our ability to maintain the
security and privacy of confidential and proprietary information, risks related
to actions or proposals from activist stockholders, risks related to the ability
to meet the contingent payment conditions of the seller note, and risks related
to changes in regulation, including developments on the use of artificial
intelligence and machine learning. Additional factors that could cause Alight’s
results to differ materially from those described in the forward-looking
statements can be found under the section entitled “Risk Factors” of Alight’s
Annual Report on Form 10-K, filed with the Securities and Exchange Commission
(the "SEC") on February 29, 2024, as such factors may be updated from time to
time in Alight's filings with the SEC, which are, or will be, accessible on the
SEC's website at www.sec.gov. Accordingly, there are or will be important
factors that could cause actual outcomes or results to differ materially from
those indicated in these statements. These factors should not be construed as
exhaustive and should be considered along with other factors noted in this
presentation and in Alight’s filings with the SEC. Alight undertakes no
obligation to publicly update or review any forward-looking statement, whether
as a result of new information, future developments or otherwise, except as
required by law.

Non-GAAP Financial Measures and Financial Statement Presentation

Included in this press release are certain non-GAAP financial measures, such as
Adjusted EBITDA Margin and Net Leverage Ratio, as well as Unlevered Free Cash
Flow and Adjusted EBITDA for the Payroll & Professional Services business,
designed to complement the financial information presented in accordance with
U.S. GAAP because management believes such measures are useful to investors.
These non-GAAP financial measures should be considered only as supplemental to,
and not superior to, financial measures provided in accordance with GAAP.

Disclosures in this press release related to the Company’s past, present and
future performance following the completion of the proposed sale of our Payroll
& Professional Services business are unaudited, preliminary metrics are often
based on internal estimates that may be subject to change. Our objective is to
provide some preliminary information to allow investors and others to begin to
evaluate our business as it will operate after the completion of the proposed
sale.

Because GAAP financial measures on a forward-looking basis are not accessible,
and reconciling information is not available without unreasonable effort, we
have not provided reconciliations for forward-looking non-GAAP measures,
including our anticipated net leverage ratio and adjusted EBITDA margin
following the completion of the pending transaction.

Investors:
 Jeremy Cohen
 Investor.Relations@alight.com 

Media:
 Mariana Fischbach
 mariana.fischbach@alight.com 

 

--------------------------------------------------------------------------------

 

Alight Inc. (NYSE: ALIT), a leading cloud-based human capital technology and
services provider


MEDIA CONTACT

Mariana Fischbach
mariana.fischbach@alight.com
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