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Paylocity to Acquire Corporate Spend Startup Airbase for $325M
In a significant move to expand its financial services portfolio, HR and payroll software company Paylocity has announced plans to acquire corporate spend management startup Airbase for $325 million. The acquisition, which is subject to regulatory approval, is expected to close in the first or second quarter of Paylocity’s fiscal year, likely within the next 30 to 60 days.
The deal represents a notable exit for Airbase, a seven-year-old fintech company founded by Thejo Kote in 2017. Airbase specializes in providing software solutions to mid-sized companies, enabling them to better manage their spending through features such as bill payments, corporate cards, and employee reimbursements.
Background of Airbase
Airbase, based in San Francisco, has seen substantial growth since its inception. The company has raised just over $100 million in equity funding from prominent investors, including Menlo Ventures, Bain Capital, and First Round Capital, among others. At the peak of the market in 2021, PitchBook valued Airbase at $600 million post-money.
Thejo Kote, the founder of Airbase, has a track record of successful exits. In 2017, he sold his previous venture, Automatic, a connected car company, to SiriusXM for over $100 million.
Paylocity’s Strategy
Headquartered in Schaumburg, Illinois, Paylocity is a publicly traded company with a current market capitalization of just under $9 billion, according to Yahoo Finance. The company serves approximately 40,000 customers and is known for its human capital management (HCM) solutions.
The acquisition of Airbase is part of Paylocity’s strategy to broaden its total addressable market beyond HCM and delve deeper into the realm of financial management, specifically targeting the office of the Chief Financial Officer (CFO).
The Acquisition Details
The acquisition will be funded through borrowings under Paylocity’s revolving credit facility. A source familiar with the deal, who wished to remain anonymous, told TechCrunch that the structured deal does not include all of the cash on Airbase’s balance sheet. This cash will be returned to the company, its shareholders, and employees. Including this, the entire value of the deal is “a little less than $400 million,” the source revealed.
The Impact on Airbase
Airbase currently employs over 300 staff members. It is unclear how many of these employees will be joining Paylocity following the acquisition. Over the years, Airbase has been a competitor in the corporate spend management space, going head-to-head with companies like Ramp and Brex. The company has reported surpassing “eight figures” in annual recurring revenue (ARR), although exact figures have not been disclosed.
The Vision for the Future
Thejo Kote expressed his thoughts on the acquisition, stating, “Airbase has many years of runway and a clear path to profitability, but I was ultimately convinced by the fantastic opportunity to create a unified HCM and Finance platform for the mid-market — leveraging Paylocity’s size and scale to bring Airbase to a much larger audience.”
Conclusion
The acquisition of Airbase by Paylocity marks a significant step forward for the company as it seeks to diversify its offerings and enhance its value proposition in the financial services market. By integrating Airbase’s spend management solutions with its existing HCM services, Paylocity aims to provide a comprehensive suite of tools for mid-sized companies, addressing both human resources and financial management needs.
As the deal progresses and regulatory approval is secured, the combined entity will likely be a force to be reckoned with in the fintech industry, offering a unique blend of services that cater to the evolving needs of modern businesses.
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