Deal is on the acquisition march. On Tuesday, the HR startup announced it would acquire PaySpace, an Africa-based payroll and HR software and services company, in a deal that would be its largest acquisition to date.
The move comes a week after Deel announced it had acquired Zavvy, a Munich-based AI-based “talent development” startup that builds tools for personalized career advancement, training and performance management. It was done within a short time.
Financial terms of the PaySpace acquisition were not disclosed.
Johannesburg-based PaySpace boasts more than 14,000 customers using its software and services in 44 countries across Europe, Latin America, the Middle East and Africa. Customers include multinational companies from a variety of industries, including Heineken, Coca-Cola Beverages and Puma Sports SA. For Deel, his $12 billion HR startup that helps recruit, pay and manage talent in more than 70 countries, the acquisition is an opportunity to strengthen its footprint in Africa.
PaySpace secured undisclosed funding last year from Netcash, a subsidiary of Sage, a payment solutions provider specializing in debit orders and payroll, but it is not in the mold of a typical venture-backed startup and is truly bootstrapped. This is a success story.
Brothers Bruce, Clyde, and Warren Clark, along with George Karageorgiades, created a software program aimed at streamlining the cumbersome payroll execution and backup procedures associated with the traditional payroll and human resources software that was prevalent at the time. We founded PaySpace in 2007 as a cloud-based payroll and HR platform.
Within three years of its inception, PaySpace expanded its product range to 11 countries. By 2022, the footprint has expanded to 43 countries. That same year, company executives announced plans for further expansion into Brazil and the United Kingdom. Established 20 years ago, the company's sales range from individual stores to companies with thousands of employees, and includes excellent customers both domestically and internationally. Managing director Sandra Clouse said in a recent interview with Financial Mind that employee numbers are growing by more than 30% each year.
Separately, San Francisco-based Deal Inc. also said Tuesday that its annual organic recurring revenue (ARR) outside of this acquisition exceeded $500 million. This is up from ARR of $290 million at the end of 2022. Deal also claims that it has been EBITDA positive since September 2022 and still has $600 million left in the bank. IPO plans are still a long way off, but likely in 2025 or 2026, Bouaziz told TechCrunch last week at the time of the Zavvy acquisition.
Expanding into Africa and businesses
The news also follows Deel's acquisition of APAC payroll provider PayGroup. Through various acquisitions, Deel now claims to own the entire HR stack, including entities spanning six continents, local his teams (Legal, HR Payroll), and local payroll engines. Deel CEO and co-founder Alex Bouaziz said PaySpace has built 45 engines over the past 15 years. His four-year goal for Deel is to provide a native payroll engine to he 100 countries.
“We were a customer of theirs, and we were using PaySpace to do payroll in 10 countries,” Bouaziz said in an interview with TechCrunch. “Our in-house team wanted to be able to take those and do calculations on the fly. Their technology is one of the best we've ever seen… We had to do a lot of convincing.”
PaySpace Director Clyde Van Wyk said in a written statement: Just as Deel revolutionized global employment, we set out to modernize the payroll industry, which was burdened by manual processes and stringent legal and compliance requirements. ”
Deel currently owns over 150 entities worldwide and manages in-house domestic payroll teams in over 70 countries, as well as providing employer of record, contractor, immigration, HRIS and performance management services. doing.
“One of the important things about running payroll the way we normally do it is making sure that the local software engine works with the tax calculations, so it has to be integrated with the best payroll software,” Bouaziz said. says. “But there's no substitute for owning your own technology. We went from two engines to five engines, and now with the PaySpace acquisition we're over 50 engines. ”
Meanwhile, Deel is making a big push to enter the enterprise, and believes PaySpace will help with that as well. Before the acquisition, Deel had his 25,000 customers including Klarna, Shopify and Hermes. Although some customers may overlap, this combination effectively increases the number of customers significantly.
Beyond the specifics, this deal highlights a notable trend over the past 18 months. It is his third acquisition involving an African-founded company and a global company.
In January last year, German vaccine maker BioNTech acquired Tunisian AI startup InstaDeep, headquartered in London, for up to £562 million. Private equity firm Medius in June acquired Expensia, an expense management startup headquartered in Tunis and Paris, for more than $100 million, according to sources familiar with the deal.
Also in 2020, Stripe notably acquired Paystack, a startup from Lagos, Nigeria that, like Stripe, offers a way to quickly integrate payment services into online or offline transactions.
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