HR and payroll software company Paylocity has agreed to acquire corporate spending startup Airbase for $325 million, the companies announced Wednesday.
The transaction is subject to regulatory approval and is expected to close in the first or second fiscal quarter of Paylocity's fiscal year, which would be within the next 30 to 60 days. The transaction will be funded with borrowings under Paylocity's revolving credit facility.
It's a reasonable exit for Airbase, which was founded seven years ago by Tejo Koté in 2017 to provide software to mid-sized businesses looking to better manage their expenses. Its platform included bill payments, corporate cards and employee reimbursements.
Since its inception, the San Francisco-based fintech company has raised just over $100 million in equity funding from investors including Menlo Ventures, Bain Capital and First Round Capital. Airbase was valued at $600 million at its market peak in 2021, according to PitchBook.
Schaumburg, Illinois-based Paylocity is a publicly traded company with a current market capitalization of just under $9 billion and approximately 40,000 customers, according to Yahoo Finance. The acquisition of Airbase will enable the company to expand its addressable market beyond human capital management (HCM) “all the way to the CFO's office,” the company said in a statement.
Cote told TechCrunch that the decision wasn't easy, but ultimately it made sense.
“While Airbase has a long-term viability and clear path to profitability, I was ultimately convinced by the incredible opportunity to leverage Paylocity's size and scale to bring Airbase to a broader audience and build an integrated HCM and finance platform for the mid-market.”
A source familiar with the deal, who asked not to be named, told TechCrunch that the structured deal doesn't include all of the cash on Airbase's balance sheet, which will be returned to the company, shareholders and employees. With that in mind, the overall deal is actually worth “just under $400 million,” the source said.
Airbase has just over 300 employees. It's not clear yet how many will join Paylocity. The company has competed with companies like Lamp and Brex for years and has focused on selling software since its inception. The company has not disclosed exact figures, but has said in the past that its annual recurring revenue (ARR) has exceeded “eight figures.”
This isn't Côté's first exit: He sold Automatic to Sirius XM in 2017 for more than $100 million.
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