Paychex said on Tuesday it will acquire payroll processing firm Paycor HCM for about $4.1 billion in cash, as the HR management firm looks to broaden its artificial intelligence capabilities and consolidate its market share.
Paychex will pay $22.50 for each Paycor share, representing about a 21.4% premium to the stock’s last close on Friday, before the news was reported.
“The acquisition of Paycor is highly complementary. It will enhance our capabilities upmarket, broaden our suite of AI-driven HR technology capabilities, and provide new channels for sustained long-term growth,” Paychex CEO John Gibson said.
The deal reflects a broader consolidation trend in the payroll and HR industry. In October, payroll firm Automatic Data Processing acquired management services provider WorkForce Software for around $1.2 billion in cash.
Shares of Paychex rose 2.8% to $139.82, while those of Cincinnati-based Paycor fell about 3% to $22.18.
“The slight pullback in Paycor’s shares today provides hints that investors don’t believe another firm is likely to swoop in with a higher bid,” said Michael Ashley Schulman, Chief Investment Officer at Running Point Capital.
“The deal should provide a boost to both public and private firms in the human-resources software and services market,” he added.
The acquisition would be the largest deal to date by Rochester, New York-based Paychex, which has a market value of around $50 billion.
Paycor had a market value of $3.3 billion at the close of trading on Friday. The company serves nearly 50,000 small and medium-sized businesses across the United States, and offers cloud-based payroll software, which helps to automate routine tasks, and mitigate compliance risks.
The deal, expected to close in the first half of 2025, has been approved by both the companies as well as private equity firm Apax Partners and its affiliates, which currently own the majority of Paycor’s outstanding shares.
Paycor in November reported first-quarter revenue of $167.5 million, beating analyst’s estimate of $162.2 million, according to data compiled by LSEG.
Source: Reuters.com