Paylocity Acquires Airbase, Expanding its Market Reach
Paylocity, a prominent HR and payroll software company, has revealed the acquisition of Airbase, a corporate spending startup, for $325 million. Pending regulatory approval, the deal is expected to close within 30 to 60 days and will be financed through Paylocity’s revolving credit facility. Airbase, founded in 2017 by Thejo Kote, specializes in corporate spending management software, encompassing bill payments, corporate cards, and employee reimbursements. The San Francisco-based fintech company attained a $600 million valuation in 2021 after raising over $100 million from investors such as Menlo Ventures and Bain Capital. Headquartered in Illinois and valued at almost $9 billion, Paylocity's objective with this acquisition is to extend its market reach beyond human capital management into CFO services. Kote anticipates the merger as a chance to create a unified HCM and finance platform for mid-market companies. The comprehensive deal value, inclusive of Airbase’s cash balance, is projected to be slightly under $400 million, with the cash distributed among the company, shareholders, and employees. Airbase, with over 300 employees, competes with companies like Ramp and Brex and has previously surpassed “eight figures” in annual recurring revenue. This represents Kote’s second significant exit, following the sale of Automatic to SiriusXM in 2017.
Key Takeaways
- Paylocity acquires Airbase for $325 million, expanding its market reach.
- Airbase, valued at $600 million in 2021, secures a decent exit.
- The deal aims to integrate HCM and finance platforms for mid-market companies.
- Airbase's balance sheet cash returns to the company, shareholders, and employees.
- Airbase, with over 300 employees, competes with Ramp and Brex in corporate spend software.
Analysis
The $325 million acquisition of Airbase by Paylocity seeks to integrate human capital management (HCM) with CFO services, enhancing Paylocity's market presence. This strategic move could potentially disrupt the corporate spend software market, impacting competitors such as Ramp and Brex. The exit of Airbase represents a substantial return for investors like Menlo Ventures and Bain Capital, while also benefiting employees and shareholders through the distribution of the cash balance. In the short term, Paylocity gains a competitive advantage; in the long term, the unified platform has the potential to redefine operations for mid-market companies, fostering growth and innovation.
Did You Know?
- Revolving Credit Facility: A type of business loan providing a company with a continuous line of credit up to a specified limit, enabling borrowing, repaying, and reborrowing within the credit limit, commonly used for working capital needs and managing cash flow.
- Human Capital Management (HCM): Refers to the strategic management of people, workplace culture, and environment, encompassing the management of employees from recruitment and onboarding to training, performance management, and payroll.
- Annual Recurring Revenue (ARR): A vital metric in the SaaS industry, calculated by multiplying the value of recurring revenues from subscriptions or contracts over a month by 12, serving as a crucial indicator of a company's growth and stability.