Apax Funds to Sell Their Majority Stake in Paycor HCM, Inc. to Paychex, Inc.

Rhea-AI Summary

Paychex (NASDAQ: PAYX) has entered into a definitive agreement to acquire Paycor HCM (NASDAQ: PYCR) in an all-cash transaction valued at $22.50 per share, representing a total enterprise value of $4.1 billion. The deal marks the exit of Apax Partners, which acquired a majority stake in Paycor in November 2018 for $1.3 billion and subsequently took the company public in July 2021.

Under Apax's ownership, Paycor has undergone significant transformation, tripling in size through strategic investments in product development and customer service. The company expanded into tier one cities across North America and established itself as a leading HCM platform for the mid-market segment. Goldman Sachs is serving as Paycor's exclusive financial advisor, with Kirkland & Ellis LLP acting as legal advisor.

Positive

• All-cash acquisition at $22.50 per share, valuing the company at $4.1 billion
• Company tripled in size since Apax's initial investment in 2018
• Successful expansion into tier one cities across North America

Negative

• None.

Insights

M&A Analyst

The acquisition of Paycor by Paychex for $4.1 billion at $22.50 per share represents a strategic consolidation in the HCM software market. This deal values Paycor at approximately 3.2x its initial acquisition price by Apax ($1.3 billion in 2018), demonstrating significant value creation. The all-cash transaction structure suggests Paychex's strong financial position and confidence in the deal's value. For Paychex, this acquisition strengthens its position in the mid-market HCM segment and expands its technological capabilities. The timing aligns with the industry trend of consolidation in the HR tech space, as companies seek to achieve economies of scale and enhance their competitive position against larger players like Workday and ADP. The premium price reflects the strategic value of Paycor's modern HCM platform and its successful expansion into tier one cities.

Technology Industry Analyst

This acquisition marks a significant shift in the HCM software landscape. Paycor's transformation under Apax's ownership, particularly its modernization of HCM platform capabilities, makes it a valuable asset for Paychex's portfolio. The deal addresses a critical need for Paychex to enhance its mid-market offerings and technological infrastructure. Paycor's success in tier one city expansion and its modern platform architecture will likely accelerate Paychex's market penetration and product development roadmap. The transaction represents a broader industry trend where established players are acquiring next-generation platforms to modernize their technology stack and expand market reach. For the HCM software market, this consolidation could lead to more integrated solutions and potentially trigger further M&A activity among competitors seeking to maintain competitive positioning.

Financial Markets Strategist

The $4.1 billion acquisition price reflects a calculated strategic premium, considering Paycor's growth trajectory and market position. For Paychex shareholders, this represents a significant investment in future growth and competitive positioning. The all-cash structure suggests strong balance sheet management and confidence in synergy realization. The deal's enterprise value implies robust forward-looking multiples, indicating Paychex's belief in substantial cross-selling opportunities and operational synergies. The transaction timing is opportune, capitalizing on the current market conditions and the increasing demand for integrated HCM solutions. This strategic move could potentially reshape Paychex's market valuation multiple, as successful integration would enhance its competitive position against larger industry players.

NEW YORK, Jan. 7, 2025 /PRNewswire/ -- Apax Partners LLP ("Apax") today announced that Paycor HCM, Inc. (Nasdaq: PYCR) ("Paycor"), a leading provider of human capital management ("HCM") software, has entered into a definitive agreement with Paychex, Inc. (Nasdaq: PAYX) ("Paychex") to be acquired in an all-cash transaction for $22.50 per share, representing a total enterprise value of $4.1 billion.  Funds advised by Apax, together with certain of their affiliates, currently own a majority of Paycor's outstanding common stock.

The Apax Funds acquired a majority stake in Paycor in November 2018 for $1.3 billion and took the company public in July 2021. Over the past six years, Apax has partnered closely with Paycor's leadership team in the transformation of the company – accelerating its top-line growth, expanding it into tier one cities across North America, and building a modern HCM platform for the mid-market.

Jason Wright, Partner at Apax and Chair of Paycor's Board of Directors, said: "We could not be more proud of our partnership with Raul and the Paycor team. The company has tripled in size since the original investment. This exceptional growth was fueled by strategic investments in product and customer service. Paycor's world-class management team has created an industry leader in mid-market HCM software."

Raul Villar, Jr., Chief Executive Officer of Paycor, said: "Apax has been a committed and valuable partner to Paycor over the past six years. Jason and the Apax team have been instrumental in shaping Paycor's strategic vision, investing for long-term profitable growth and scaling our overall enterprise capabilities. We thank the entire Apax team for their guidance and unwavering support for Paycor and our loyal associates and clients."

Funds advised by Apax have a long history of investing across the software industry and in subsectors such as HCM software. In 2024, the Apax Funds acquired the Zellis Group, one of the leading providers of payroll and HR software solutions to customers in the UK and Ireland and an emerging leader in the global benefits administration software market. Other noteworthy past and current software industry investments include Duck Creek Technologies, Epicor Software Corporation, Sophos Group, ECi Software, and RealPage, Inc.

Goldman Sachs & Co. LLC is serving as Paycor's exclusive financial advisor and Kirkland & Ellis LLP is serving as Paycor's legal advisor.

About Paycor
Paycor's HR, payroll, and talent platform connects leaders to people, data, and expertise. We help leaders drive engagement and retention by giving them tools to coach, develop, and grow employees. We give them unprecedented insights into their operational data with a unified HCM experience that can seamlessly connect to other mission-critical technology. By providing expert guidance and consultation, we help them achieve business results and become an extension of their teams. Learn more at paycor.com.

About Paychex
Paychex, Inc. (Nasdaq: PAYX) is an industry-leading HCM company delivering a full suite of technology and advisory services in human resources, employee benefit solutions, insurance, and payroll. The company serves over 745,000 customers in the U.S. and Europe and pays one out of every 12 American private sector employees. The more than 16,000 people at Paychex are committed to helping businesses succeed and building thriving communities where they work and live. To learn more, visit www.paychex.com.

About Apax Partners
Apax Partners LLP is a leading global private equity advisory firm. For over 50 years, Apax has worked to inspire growth and ideas that transform businesses. The firm has raised and advised funds with aggregate commitments of almost $80 billion. The Apax Funds invest in companies across three global sectors: Tech, Services, and Internet/Consumer. These funds provide long-term equity financing to build and strengthen world-class companies. For further information about Apax, please visit www.apax.com. Apax is authorized and regulated by the Financial Conduct Authority in the UK.

Media Contacts:

Todd Fogarty, Kekst CNC 
Todd.fogarty@kekstcnc.com 
+1 212 521 4854 

Gill Corish, Apax 
Gill.corish@apax.com 
+44 207 872 6480 

View original content:https://www.prnewswire.com/news-releases/apax-funds-to-sell-their-majority-stake-in-paycor-hcm-inc-to-paychex-inc-302344502.html

SOURCE Apax Partners

FAQ

What is the acquisition price for Paycor HCM by Paychex (PAYX)?

Paychex (PAYX) is acquiring Paycor HCM for $22.50 per share in an all-cash transaction, representing a total enterprise value of $4.1 billion.

How much did Apax Partners initially pay for Paycor in 2018?

Apax Partners acquired a majority stake in Paycor in November 2018 for $1.3 billion.

When did Paycor go public under Apax Partners' ownership?

Paycor went public in July 2021 under Apax Partners' ownership.

How much has Paycor grown since Apax's initial investment?

Paycor has tripled in size since Apax's initial investment in November 2018.

Who are the advisors for the Paychex-Paycor acquisition deal?

Goldman Sachs & Co. is serving as Paycor's exclusive financial advisor, and Kirkland & Ellis LLP is serving as Paycor's legal advisor.