You could be forgiven for not knowing the name Ultimate Software (NASDAQ:ULTI). The software-as-a-service specialist, which provides payroll and HR management systems for midsize companies, has flown under the radar for a lot of us. But Motley Fool Asset Management's Bill Barker was quite familiar, because Ultimate has been among its holdings for some time now.

In this segment from MarketFoolery, he talks with host Chris Hill about the upsides of this company, which has been taking market share from larger rival Paychex, and what the founder/CEO might have been hoping for in selling out to private equity.

A full transcript follows the video.

This video was recorded on Feb. 4, 2019.

Chris Hill: We're going to start with merger Monday because it is, once again, merger Monday. In this case, Ultimate Software -- great name -- being acquired by a private investment firm for $11 billion. This is an all-cash deal. Shares of Ultimate Software up 20%. Good day for the shareholders. This is one that I don't think we've ever talked about. What does this company do, besides have a great name? This is one that you and your colleagues at MFAM Funds have known about, and I believe invested in for a while now.

Bill Barker: Yeah. It's a happy Monday for shareholders of Ultimate. Two of our funds have been long-term shareholders of it thanks to Tony Arsta, let's give credit where credit's due, for his work on this company going back to at least 2014, probably earlier.

It's a payroll and human resources management company, which is geared toward middle-sized companies. It's had a great run. Of course, the employment numbers not just recently but going on seven, eight years now, have been very good. So, they've got more and more work to do. They're competing with companies; a better-known company would be Paychex in the space. They've been giving up market share to not only Ultimate, but some of the smaller players. The 20% premium that is on Ultimate's price today is, there are other companies like Paycom and Paylocity, which are two other very similar companies but smaller which are going up in sympathy as people think, "Well, if I can't get Ultimate anymore, maybe the things that are out there might be acquired." So, you've got those companies being up 2%, 5% today.

Hill: Why do you think they agreed to be acquired? If, as you said, they've been doing a decent job of taking market share from Paychex -- just to put some numbers around this, Paychex is a $25 billion company. With this buyout, obviously, Ultimate software being valued at around $11 billion. It's not like they were dramatically smaller than Paychex. If they were gaining on them, I'm curious if they always saw this as the logical conclusion, that at some point, if the price is right, they'd agree to be bought out. I'm sure there are at least a few shareholders who are looking at this saying, "No! Even with the 20% premium, this was a train that was running well, and I wanted to keep riding it!"

Barker: I'm sure there were. It's a founder-CEO company. He's still there. He's been there for 20-some years. One of the things specifically about this company that it points to with some pride is the company culture and how they've ranked in some Forbes rankings of most beloved companies. I think they were in the top 10 a couple of times, in terms of employee happiness and admirability. I think they pointed, in their press release, to this being a way to maintain the company culture.

If -- and now, I'm going to speculate -- if the founder wanted some sort of payday that he could realize through this, and yet maintain the company and the culture that he loved, and he's found a buyer that's willing to do that in a way that he didn't think could necessarily be done in the public markets, maybe that's the rationale. But that's speculation.

Bill Barker has no position in any of the stocks mentioned. Bill Barker is an employee of Motley Fool Asset Management, a separate, sister company of The Motley Fool, LLC. The views of Bill Barker and Motley Fool Asset Management are not the views of The Motley Fool, LLC and should not be taken as such. Chris Hill has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends PAYC. The Motley Fool recommends Ultimate Software Group. The Motley Fool has a disclosure policy.