Billion-dollar deal sealed! Alight Inc. transforms with major sale to H.I.G. Capital

Alight, Inc. (NYSE: ALIT), renowned for its cloud-based human capital technology, announced the completion of its strategic divestiture of the Professional Services and Payroll & HCM Outsourcing businesses within the Employer Solutions segment. The transaction, which concluded with an affiliate of H.I.G. Capital, is valued up to $1.2 billion. It comprises $1 billion in upfront cash and an additional $200 million in seller notes, with $150 million contingent on the new entity, now named Strada, achieving its 2025 financial goals.

Financial Implications and Strategic Reorientation:

In a move poised to reshape its financial structure, Alight anticipates deploying the net proceeds primarily to slash its debt, aiming to bring its pro forma net leverage ratio below three times. Future allocations are set for share repurchases and other general corporate engagements. Alight’s evolution focuses on enhancing a streamlined platform dedicated to employee wellbeing and benefits, promising more efficient cost, experience, and productivity outcomes.

Executive Insights:

Stephan Scholl, CEO of Alight, expressed enthusiasm about the deal’s potential to fast-track the company’s transformation towards a more focused service model. “This strategic milestone accelerates our transformation towards a simplified and focused platform for employee wellbeing and benefits,” Scholl remarked, highlighting the seamless collaboration that characterized the transaction’s progression.

William P. Foley, II, Chair of the Board at Alight, also commented on the deal’s alignment with strategic objectives. “This transaction unlocks significant potential for Alight to drive sustainable, profitable growth and enhanced shareholder value,” he stated.

About Strada:

Strada emerges as a formidable entity in the human capital management and payroll technology arena. With a robust workforce of over 8,000 employees worldwide, Strada is set to deliver comprehensive technology and service solutions across multiple countries, maintaining a focus on U.S. and global payroll, HR administration, and outsourced services.

Future Collaboration and Market Positioning:

Post-transaction, Alight and Strada will maintain a commercial partnership, aiming to bolster their market position by leveraging combined service capabilities and enhancing overall client value.

Long-term Corporate Strategy and Financial Targets:

As Alight restructures its business model, the company is also recalibrating its financial targets, aiming for an adjusted EBITDA margin increase of nearly 300 basis points at deal closure, with a mid-term goal of reaching a 28% margin. These measures are anticipated to amplify cash generation and further reduce the company’s leverage, facilitating sustained investment and shareholder returns.