ADP Reaches India - Analyst Blog
17 Janeiro 2012 - 8:15AM
Zacks
Automatic Data Processing Inc. (ADP) recently
marked its entry into the lucrative Indian market with the
acquisition of Ma Foi Consulting Solutions Ltd, an Indian human
resource and payroll management company. The acquired company was
previously a part of Ma Foi Randstad, an Indian subsidiary of
RANDSTAND HOLDINGS. Though the financial details of the deal were
not disclosed, ADP stated that it will incorporate Ma Foi’s 200
associates.
ADP will now manage Ma Foi’s extensive Indian clientele,
including both domestic and multinational companies. The
acquisition is a strategic fit for the company as it will
facilitate further expansion in developing markets. Through this
acquisition, ADP will gain access to the growing market of human
resource business process outsourcing (HR BPO) in India.
Incidentally, Ma Foi and ADP have enjoyed a healthy business
relationship since 2009 for the marketing and operations of ADP
Streamline, ADP’s multi-country payroll and human resource
service.
ADP’s growth in recent years has been largely attributable to
accretive acquisitions, for which it has spent approximately $776
million in 2011 itself. The company reported a year-over-year
increase of 11.0% in total revenue to $9.88 billion in fiscal 2011,
driven by a 4.7% growth from the acquired businesses.
Recently, ADP acquired The RightThing, a leading recruitment
process outsourcing (RPO) provider. The acquisition is expected to
expand ADP's human resources business process outsourcing portfolio
and complement the existing applicant tracking and talent
management solutions, thereby boosting ADP’s customer base and
top-line growth going forward.
Moreover, the acquisition of privately held WALLACE is expected
to further boost ADP’s tax credit solutions portfolio and expand
its customer base going forward.
We believe that the back-to-back acquisitions will drive
top-line growth for fiscal 2012 and beyond. The new acquisitions
are expected to diversify ADP’s revenue growth base, which in turn
will help the company to outperform the market, in our view.
However, increasing competition from Paychex
Inc. (PAYX) and Insperity Inc. (NSP) and
a gloomy macro outlook in North America and Europe are the major
headwinds in the near term. Additionally, higher unemployment rates
and low interest rates remain concerns for the company’s payroll
processing business.
We maintain our Neutral recommendation on the stock over the
long term (6-12 months). Currently, Automatic Data Processing has a
Zacks #4 Rank, which implies a Sell rating on a short-term
basis.
AUTOMATIC DATA (ADP): Free Stock Analysis Report
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