RealTime IT News

ProAct Buys Interlynx for $60 Million

In the largest merger to date of online human resource outsourcers, Interlynx Technology, a 6-year-old Boston company whose Web-based services are used by more than 2 million employees, has been acquired for $60 million by ProAct Technologies Corp.

Formerly known as CFN, ProAct is a New York City-based portal that focuses its online benefit and h.r. services at large corporate customers.

The privately held companies said the deal, involving a combination of cash and stock, would make ProAct the largest Web-based human resource outsourcing business.

ProAct said employees of its corporate customers will be able to get access to a wider range of data about benefit, payroll or other h.r. packages via the Web, interactive voice technology, call centers or other applications.

Interlynx is known for its "self-service" h.r. package, allowing employees to use the Web to process high-volume transactions -- W2 statements, benefit elections, calculating the impact on benefits of a transfer or promotion, etc. Its 80 clients include 42 Fortune 500 companies, including Compaq, General Electric, Honeywell and Philips Electronics.

For its part, ProAct -- which has raised $280.5 million in equity funding since March -- is known for services focused on medical and insurance packages, 401K and other pension plans, and volunteer employee benefits such as mortgage or child-care services. It has more than 600 corporate customers.

ProAct President Cathleen Raffaeli said, "Interlynx has been an undisputed leader in the self-service marketplace since its inception six years ago. By joining forces we will be able to offer the marketplace the de facto, integrated application for eHR transactions in the employee and manager self-service area."

Jenni Lehman, a vice president of the analyst firm Gartner Group, said the deal makes sense for both companies because online h.r. firms will need to offer a complete roster of services to win corporate customers.

Interlynx co-founder, president and CEO Michael George said no layoffs will result from the merger. In fact, he said ProAct, which has 350 employees, is looking to double the Interlynx operation from 50 to 100 employees. George will become a ProAct executive vice president directing sales and business development.

Interlynx has raised less than $5 million in venture funding, primarily from Geo Capital Partners, and has less than $10 million in revenues. George said the company has been profitable each month this year and has quadrupled revenue growth over last year.

"People have asked how a company our size could have a deal of this magnitude in this market," George said. "We never saw ourselves as a Net model modifying a traditional business. We took fundamental business principles of managed growth and profitability and applied them to an Internet business. We've worked very hard to get the teeth on our wheels to match."

George said the merged ProAct will have a sizable edge in a market that International Data Corp. expects to hit $4 billion by 2004. He predicted his new employer would have a $1 billion initial public offering once the stock market stabilizes, saying, "We've got lots of dry gunpowder here."

ProAct's primary competitor is privately held Workscape, a Reston, Va., company with offices in Framingham, Mass., and San Jose that last month closed on $45 million in venture funding.