Paycor HCM stock soars following Bloomberg report on acquisition talks

Investing.com -- Shares of Paycor HCM Inc. (NASDAQ:PYCR ) surged 21% following a report from Bloomberg that said Paychex Inc (NASDAQ:PAYX ) is in advanced discussions to acquire the company. The potential deal, which could be announced as early as this week, would unite two significant entities in the human-resources software and services market. Despite the increase in stock price, representatives for both Paychex and Paycor have not commented on the matter, Bloomberg noted. 

The acquisition talks come at a time when the market for HR services is experiencing consolidation, with companies seeking to expand their offerings and achieve cost efficiencies. Paycor, with a market value of $3.3 billion as of the last trading session, specializes in cloud-based software for small and medium-sized businesses, boasting over 30,000 customers across the United States.

Paychex, valued at over $50 billion, is based in Rochester, New York, and provides a range of services including human resources, employee benefits, insurance, and payroll to more than 745,000 customers in the US and Europe. The acquisition of Paycor would represent the largest deal for Paychex to date and could significantly enhance its market presence.

Needham analyst Scott Berg commented on the potential acquisition, stating, "While few other details are available, this deal would mark the largest in the HCM space since Hellman & Friedman's 2019 acquisition of Ultimate Software (ETR:SOWGn ) for $11B and ultimately merged with Kronos. If accurate, we believe PAYX has interest in PYCR for its product, as this acquisition would help PAYX move even more up market that its current SMB to low-end of mid-market focus. However, HCM consolidations of this scale are rare since they would be perceived more as an expensive customer acquisition play than a product expansion story. If the deal is executed, we believe a valuation of 6x - 7x FY25 revenues is likely appropriate and would be nearly a 45% premium on Friday's closing price."

The potential deal follows a similar move by Automatic Data Processing Inc (NASDAQ:ADP )., which agreed to acquire WorkForce Software in October, indicating a trend of strategic acquisitions in the payroll and HR services sector. As the market awaits further details, the surge in Paycor's stock reflects investor optimism about the benefits of such a consolidation.

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Source: Investing.com