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Bill Ackman On How To Improve ADP: 'There Is A Lot Of Hand-Holding'

Bill Ackman On How To Improve ADP: 'There Is A Lot Of Hand-Holding'

Bill Ackman is facing some criticism for his activist campaign against Automatic Data Processing (NASDAQ: ADP) but true to his form, the billionaire isn't backing away from his thesis.

Part of Ackman's thesis on ADP stems from the company's spin-off of a company called CDK Global Inc (NASDAQ: CDK) in 2014 after owning the business for 42 years, he explained during CNBC's "Halftime Report." When it was owned by ADP, CDK boasted 16 percent EBIT operating margins but within two years of its spin, the metric improved to 26 percent. Within three years of the spin, CDK's stock had doubled.

"How is that when it was run by ADP all they could muster is 50 basis points of annual improvement and then when it spun off by ADP they improved margins by 70 percent in two years and they are on their way to doubling margins in three years?" Ackman asked. "That's really what we're talking about."

ADP's business stands to improve from technological innovation and even basic day-to-day tasks like giving clients the ability to change their password online without having the need to call customer service or to better understand how to use the platform, Ackman said. Meanwhile, ADP's competitors simply have "better products," which is impacting its market share in the space.

"There is a lot of hand-holding," Ackman said. "What we are talking about here is making this a best in class company, an efficient company... making ADP the best company it can be."

Related Links:

Highlights From Cramer's Interview With ADP's CEO Carlos Rodriguez

Whether Ackman Wins Or Loses His Battle With Management, He's Likely To Cause Change At ADP

Image: Raysonho @ Open Grid Scheduler / Grid Engine (Own work), via Wikimedia


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