“[ADP’s] rebuttal was, in our view, a confident, well-articulated, detailed, reiteration of the status quo for ADP, providing plenty of insightful incremental data points and disclosures, but no material change to the financial outlook for the company. ADP established three-year guidance for the first time, but the guidance was consistent with its already-disseminated FY18 guidance and long-term business model.”

 Lisa Ellis, Bernstein (Sep 13, 2017)

“We continue to view Pershing’s activism as a net win for the company longer term.”

– Tien-Tsin Huang, J.P. Morgan (Sep 7, 2017)

“ADP gross margins are noticeably lower than peer PAYX and the software providers despite the company's significant scale. In addition, despite the comparison issues such as inclusion of pass through revenues, greater international exposure (higher growth/lower margins), and revenue mix, we believe the company has significant opportunity to expand margins… we agree that there are significant margin expansion opportunities and expect the activist involvement to potentially help drive greater focus on improving the Employer Services margins going forward.”                                                            

  – Bryan Keane, Deutsche Bank (Sep 5, 2017)

“We believe there is likely a valid case for accelerated margin expansion at ADP, and there is merit in Pershing challenging the rate and pace at which ADP is driving efficiency in service delivery and addressing its legacy platforms. There is a 10-15ppt delta between ADP and competitor margins which cannot be easily explained by structural differences, ADP's business is more labor-intensive than peers, and examples exist (e.g., CDK) of successful margin expansion after spinning out of ADP.”

– Lisa Ellis, Bernstein (Aug 31, 2017)

“We agreed with many of the points highlighted by Pershing… There is an opportunity to further improve margins. ADP's revenue/employee lags competitors reflecting multiple platforms and redundant service centers.”

– Mark Marcon, Baird (Aug 18, 2017)

“Pershing clearly did its homework and scored some important points. After listening in, our sense is there is an above consensus opportunity to boost profitability. … We were expecting a much more detailed rebuttal from the company yesterday. Instead, all we got was a claim that Pershing's presentation ‘betrays a fundamental lack of understanding of the current state of ADP's business.’ To that, we'd say that at this point, no investor, no analyst, NO ADVISOR, and probably few board members know more about problems in the company than Pershing Square.”

– Don Bilson and Eric Wiley, Gordon Haskett (Aug 18, 2017)

“[Pershing Square] did break out a number of analytically sound points that can add up to a sizeable benefit. We particularly liked the points on the level of support (vs. service); product sprawl; siloed / unnecessarily complex organization and duplication. Our own checks suggest this may be true… ADP has been managed for risk-averse multi-year gain, it is appropriate to ask these tough questions and expect an answer on the likelihood of setting an aggressive target and trying to deliver on it.”

– Ashwin Shirvaikar, Citi (Aug 17, 2017)

“We agree with Pershing’s longer-term goals; we suspect management and the board will as well. … The notion of consolidating the Enterprise segment onto the mid-market platform is perhaps our most significant incremental takeaway. This could substantially simplify ADP’s operating model and increase scale efficiencies if it can be executed.”

– David Grossman and Craig Jones, Stifel (Aug 17, 2017)

“This is similar to Pershing Square’s investment in Canadian Pacific, a company that was near its all-time high when Pershing Square filed its 13D with a thesis of margin improvement. Canadian Pacific also had excuses for its margins (i.e., bad weather) but Pershing Square ultimately implemented its plan and doubled the profit margins, leading to a 153.3% return on its investment. Similarly, Pershing Square was instrumental in improving margins at Air Products by 50% in three years.”

– 13 D Monitor (Aug 7, 2017)

“Why is there such a long period before the shareholder meeting for director nominations? Does Pershing Square maybe have a leg to stand on?

“Rodriguez needs to acknowledge that while no one likes to face the fact that they can be replaced, a CEO must always realize that they serve at the pleasure of the Board and the shareholders of the company. All shareholders deserve respect and acknowledgement. It’s the job of the CEO not only to sell their vision of the company to clients but also to shareholders – even the hostile shareholders.

“No CEO, Chairman or Board member should ever forget that their true boss is the shareholder.”

– Egan-Jones Proxy Services | August 14th, 2017

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Pershing Square
Fran McGill
212 909 2455
[email protected]

Steve Murray
212 843 8293
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Eric Kuo
212 843 8494
[email protected]

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