The HRtech Space is hot - with Paygroup being acquired by Deel for $119m

Deel , a Compliance and payroll tech unicorn is  entering the APAC region by acquiring ASX listed small cap HR company “Paygroup” for $119m at 174% premium to its share price at 5X ARR

What And who is Paygroup 

PayGroup is a SaaS Human Capital Management (“HCM”) product suite. processing about $11 billion in payroll each year for thousands of businesses across 33 countries.

Founded in 2006 by Mark Samlal and wife Michelle in Singapore - they grew it - got it investment ready and listed it in 2017 . They retain circa 19% of the business prior to acquisition for $119m .

In 2019 Paygroup  acquired Astute One founded by Marcus Webb,  - more than doubling  Annual Recurring Revenue (ARR) for FY20 to $17.5m delivering 4.7m payslips annually , servicing the contractor labour market 

In 2020 it acquired Malaysian group Talentoz for $1m (2X SAAS revenue) - $165k in cash and rest in shares adding 40 clients and  11 software modules to its suite -covering areas such as payroll, analytics, talent management, time and attendance, and performance management. 

In 2022 it has been acquired by Deel for 5X ARR at $119m . Mark Samlal of Paygroup is confident that this is a great acquisition for Deel , as it has  strong, recurring revenues from blue-chip customers across Asia-Pacific and can be used as a bridge to building their expertise in Asia.

CEO of Deel Alex Bouaziz said that Paygroup seems like a natural fit to the Deel business, with complementary services and strong talent. It will rapidly grow our footprint in Asia-Pacific,”

What Deel does 

 Deel was founded in SF in 2019. enables businesses to hire independent contractors and full-time employees in over 150 countries, making sure the business is compliant with local laws and takes minutes for o do -  without the need for a local entity. It has 8000 customers including Aussie beverage company Lyre’s, Zoomo, Coinbase and Shopify. 

When a company hires employees or contractors with Deel, Deel takes on the responsibility to ensure the, removing that burden from its customers. It provides the tools  to onboard and pay international teams… totally relevant in this era of distributed workforce 

Move to APAC

 Bouaziz said  that  “APAC is home to two-thirds of the world population, with huge skilled talent pools of knowledge workers and tech talent –.. we can open thousands of virtual employment doors around the world.”

The Leverage Play 

Despite only launching in 2019, the business has already surpassed $100 million in annual recurring revenue, fuelled by the remote working boom. It was valued at $US5.5 billion in a Series D funding round, but in May, Axios reported from undisclosed sources that it had raised another $US50 million at a $US12 billion valuation.

That’s a 50X ARR 

Leverage at its finest 

Takeout 

Australia and Asia is a great hunting ground for these companies trading at 20x  and 50X to acquire businesses for 5X and 10X