Paychex has reached an agreement to acquire Paycor HCM for a substantial $4.1 billion. This strategic move is designed to enhance Paychex's position in the human resources sector by advancing its offerings in artificial intelligence. The acquisition is set to elevate Paychex's capabilities to serve the upper tiers of the market while providing a significant boost to its technological framework in HR solutions. The cash consideration proposed amounts to $22.50 per share, reflecting a notable 19% premium based on Paycor's average share price over the 30 days leading up to January 3.
Consequently, Paycor's stock saw a midday decline of 3.1%, whereas Paychex's shares experienced a 2.3% rise. Paycor, a prominent player in human capital management, employs about 2,900 individuals and caters to over 49,000 clients, effectively supporting roughly 2.7 million employees across the United States.
Since its IPO in 2021, Paycor's commitment to investing in data, AI, and other innovative technologies has been pivotal in fortifying its position in the higher market segment. According to Paychex Chief Executive John Gibson, the acquisition is considered "highly complementary". He stated, "It will enhance our capabilities in the upper market, broaden our array of AI-driven HR technology capabilities, and yield new avenues for sustained long-term growth." Paycor is primarily owned by Apax Partners, which acquired its stake in November 2018.
Jason Wright, a partner at Apax and the chair of Paycor's board, remarked how the company has tripled in size since Apax's initial investment. The merger is expected to culminate in one of the most extensive offerings within the industry, with anticipated run-rate cost synergies projected to surpass $80 million in the near term.
Furthermore, as the companies integrate post-acquisition, substantial revenue synergy opportunities are expected to materialize. Expected to close in the first half of 2025, the transaction is contingent upon regulatory approvals. Paychex has outlined its plan to finance the acquisition through incremental debt and has secured committed financing to facilitate this significant investment. Paycor's CEO, Raul Villar Jr., expressed optimism about the union, stating, "We are confident that our customers will benefit from the shared expertise, resources, and innovative human capital management solutions provided by both companies to elevate people and business performance even further." The current trading price stands at $139.36, with a change of +3.30, reflecting a percent change of +2.43..