Summary
- On 04 November 2020, PayGroup entered into a binding Share Purchase agreement to acquire Payroll HQ.
- The acquisition is in line with the PayGroup’s aim to grow revenue and client base plus capitalise on the fast-growing outsourced HCM and payroll markets across the APAC region.
- The total consideration of the acquisition is A$2.535 million, payable via the issue of 4,122,694 PayGroup shares.
- PayGroup shares ended flat following the acquisition announcement.
PayGroup Limited (ASX:PYG) announced on 04 November that it had entered into a binding Share Purchase deal to acquire Payroll HQ Pty Ltd. The shares on the day started trading higher but ended the session flat at A$0.55. On 5 November 2020, PYG shares were trading at A$0.545 (at AEDT 01:09 PM), down 0.910% from the last close. PayGroup Limited has a market cap of ~A$42.21 million.
Headquartered in Melbourne, PayGroup (ASX:PYG) is a specialist provider of payroll and human capital management solutions. It is the holding Company or PayAsia, TalentOz, and Astute One.
The Company signed a binding Share Purchase Agreement to acquire the overall shares in Payroll HQ Pty Ltd for the total consideration of A$2.535 million. The amount would be payable via the issue of 4,122,694 PayGroup shares at A$0.615. Another earn-out of approximately A$1.28 million is likely to be attained based on the FY2021 forecast revenue of Payroll HQ. The earn-out would be fully paid via the issue of PYG shares at the same price. The new shares issued would be escrowed for 24 months.
Payroll HQ is a privately-owned company from Sydney that provides Software-with-a-Service payroll outsourcing services to more than 100 high-quality corporate clients in Australia as well as New Zealand.
What is the Rationale Behind the Acquisition?
PayGroup Limited aims to grow its revenue and client base and also capitalise on the fast-growing outsourced HCM and payroll markets across the APAC region. The acquisition of Payroll HQ Pty Ltd is consistent with this strategy.
The Company believes that Payroll HQ would add around A$2.25 million of revenue to PayGroup. Further, through this acquisition, there would be significant cross-selling prospects for the Company across the newly expanded client base. The group can market more products and services, especially its full HCM module suite and the Treasury Services offering.
PayGroup also believes that it could improve its sales and management capabilities in the Australian market through the deal.
Key Terms of the Acquisition
The deal between the two parties is binding and depends on the completion of customary conditions. This follows a massive and detailed due diligence process which would be assumed by PayGroup.
Further, as per ASX listing rule 7.1, the issue of shares of PayGroup Limited for the Acquisition would depend on an Extraordinary General Meeting of PayGroup shareholder which would happen shortly. The Company would provide the date for the same in upcoming announcements. PayGroup would be retaining all the employees of Payroll HQ.
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