TriNet purchases Gevity to create independent human resources titan

After a recent speech at the Stanford Graduate School of Business, Burton Goldfield was shocked to learn almost all the recession-wary grads wanted to join existing firms instead of striking out on their own.

"It was the most risk-averse and pessimistic class I've ever seen," Goldfield said. "It was disappointing. … I think the opportunities out there in the market are better than ever."

Fortunately, his bankers agree with him.

As chief executive of TriNet Group, a human resources outsourcing firm, Goldfield convinced a consortium of banks to lend his company $80 million in unsecured debt to buy troubled Bradenton-based competitor Gevity. Through the $98 million acquisition, which closed last week, TriNet becomes the largest independent outsourcing firm of its kind, boasting 130,000 work-site employees handling operations for more than 8,000 small and midsized businesses.

Led by Comerica, the lenders funding the deal to buy Gevity and take it private included Bank of America, KeyBank and US Bank. Interest was so keen that funding was oversubscribed, with TriNet offered more money than it needed.

As recently as November, bankers didn't want to touch the deal. Goldfield sees the change of heart as both a sign of easing credit markets and a sign of faith in his vision.

That vision: It will be the mom-and-pop businesses, not the corporate titans, that will lead the way out of this recession. And TriNet plans to help them grow, bolstered greatly by the Gevity deal.

TriNet "has been a great company, but frankly very regional," he said. Gevity not only helps the company become more of a national player (now second only to a division of ADP in number of small companies served), but it adds a well-regarded risk management operation and strong relationships with insurance companies that TriNet was lacking.

Gevity's former headquarters in Bradenton will continue to employ about 400 of TriNet's combined work force, more than TriNet's other two main locations in the San Francisco area and Reno, Nev.

Gevity's decline

Before TriNet entered the picture, Gevity was in upheaval.

After going public in 1997, its shares traded as high as $30 per share in early 2006. By 2008, shares were down to $2 apiece, and Gevity was reporting consistent losses as both its number of clients and revenue per client had fallen.

In the days before the merger closed, several of Gevity's top executives, including CEO Michael J. Lavington, took exit packages amid another round of layoffs within the company.

Goldfield visited his newfound Bradenton employees last week to reassure them of his commitment to keep the regional operation here and to introduce some members of his 50-person integration team.

But there was no "business as usual" talk that's often common after mergers. Rather, Goldfield said both Gevity and the old TriNet are in for "a cultural shift."

Drawing from his experience working for IBM, Goldfield wants to emphasize collaborating on processes throughout the company, across regions. He wants to get away from management by strolling through an office and talking to workers at their desks to encourage innovation.

"If we don't have a company where the best ideas win, this was a big waste of time," he said.

TriNet's rise

In the past three years, TriNet has been one of the fastest growing players in the professional employer organization industry. Backed by equity firm General Atlantic LLC, which remains its largest shareholder, TriNet grew 40 percent in 2008.

Prospects may be reluctant to outsource in these penny-pinching times. To continue growing, Goldfield's sales team tries to market the company as a cost-saving partner. Small businesses can get cheaper insurance for their employees and even 401(k) programs by pooling their employees with those of other small businesses in the TriNet network.

TriNet says it offers expertise to help companies with restructuring, with hiring and firing workers. "Even in these times, it's still hard to get good people," Goldfield said.

Currently, TriNet estimates that only 5 percent of the market outsources any HR services, providing ample marketing opportunities.

Goldfield sees at least one advantage of taking on a major merger during a recession: lowered expectations gives them time to worry more about structure than immediate results.

"We have an opportunity to be critical of our systems. This is the time to figure it out," he said. "As the economy gets better, we will have the right systems and processes in place to grow quickly."

Jeff Harrington can be reached at jharrington@sptimes.com.