Human resources and payroll software leader Paylocity has announced its plan to acquire fintech startup Airbase for a total of $325 million, as disclosed on Wednesday.
This significant transaction is contingent on regulatory approval and is projected to finalize within the first or second quarter of Paylocity’s fiscal year, which translates to a timeframe of approximately 30 to 60 days. The funding for this acquisition will be sourced from Paylocity’s revolving credit facility.
This deal marks a notable exit strategy for Airbase, which was established seven years ago by Thejo Kote in 2017, aiming to assist mid-sized companies in effectively managing their expenditures. The Airbase platform features tools for bill payments, corporate card management, employee reimbursements, and more.
With headquarters in San Francisco, Airbase had secured over $100 million in equity funding from various investors, including Menlo Ventures, Bain Capital, and First Round Capital, among others. As recorded by PitchBook, Airbase was valued at $600 million post-money during the market peak in 2021.
Paylocity, located in Schaumburg, Illinois, is publicly traded and boasts a market capitalization nearing $9 billion and serves approximately 40,000 clients, according to Yahoo Finance. The company has expressed that integrating Airbase will enable it to broaden its total addressable market beyond human capital management (HCM) and delve deeper into the office of the CFO.
In an interview with TechCrunch, Kote stated that the decision to sell was challenging but ultimately justified by the immense potential to create an integrated HCM and Finance platform for mid-sized markets, leveraging Paylocity’s substantial size and resources to reach a wider audience.
A source with insights into the transaction, preferring to remain anonymous, revealed that the structured deal does not encompass the full cash holdings present on Airbase’s balance sheet, which will be returned to the company, its shareholders, and employees. This means the total value of the agreement is somewhat less than $400 million when including those assets.
Airbase employs just over 300 individuals, and it’s yet to be determined how many will transition to Paylocity’s workforce. Over the years, Airbase has been in competition with companies like Ramp and Brex, focusing extensively on software sales since its inception. Although at one point it claimed to surpass “eight figures” in annual recurring revenue (ARR), specific figures have not been disclosed publicly.
This acquisition isn’t Kote’s first foray into successful exits; he previously sold Automatic to SiriusXM in 2017 for in excess of $100 million.