Paychex said it will acquire Paycor HCM in an all-cash deal valued at $4.1 billion.
Under the terms of the deal, Paycor shareholders will get $22.50 a share. The deal is expected to close in the first half of 2025.
The merger brings together two Constellation Research Shortlist vendors for payroll for North American SMBs and HCM suites focused on North America.
According to Paychex and Paycor, the combined company will boost its total addressable market by offering a suite of technology and services for HR, employee benefits, insurance and payroll.
Paycor has 2,900 employees and more than 49,000 customers. Paycor's HCM, payroll and talent software has typically served small businesses but has been moving toward larger enterprises.
John Gibson, CEO of Paychex, said Paycor "will enhance our capabilities upmarket, broaden our suite of AI-driven HR technology capabilities, and provide new channels for sustained long-term growth."
The combined company is expecting cost savings of more than $80 million in the short term and neutral to accretive to adjusted earnings in the first year post close. Paychex will gain from Paycor's partnerships and sales coverage and HCM features that will round out the HCM suite.
Going forward, Paychex and Paycor will invest in data and AI tools for customers.
Constellation Research analyst Holger Mueller said:
"There always have been consolidation trends in the HCM market – but the acquisition of Paycor by Paychex is a new apex. The SMB player buys the large enterprise player, resulting in a double automation portfolio – that is unrivaled – apart from UKG, which itself is the product of a merger. The acquisition is good news for the higher-end Paychex customer and for Paycor customers who have smaller operations and subsidiaries in Canada. It is now up to the Paychex management team to successfully integrate portfolios, go to market and more."
In a presentation, the focus of the deal was go-to-market efforts. Paychex and Paycor expect to win in more customer segments, sell Paycor's workforce management, talent acquisition and talent management tools to Paychex customers. Paychex's HR advisory and employee solutions will be sold to Paycor customers.
By the numbers:
- Paychex has $5.3 billion in annual revenue.
- Paychex has more than 2.3 million HR outsourcing worksite employees.
- Paychex HCM and payroll software has processed more than $950 billion financial transactions and is the leading 401(k) record keeper in the US.
- Paychex has 745,000 payroll clients.
- Paycor has $655 million in annual revenue and 90% of it is recurring revenue.
- Paycor revenue growth in fiscal 2024 was 19%.
- Paycor has 2.7 million active employees on its platform.
