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Paychex (Nasdaq: PAYX) is in advanced talks to buy smaller payroll processing rival Paycor HCM (Nasdaq: PYCR), Bloomberg reports.

Why it matters: The highly fragmented SME HR and payroll sector could see M&A activity drive consolidation.

Context: Cincinnati-based Paycor provides a cloud-based payroll and human resources platform serving over 30,000 mid-market clients and more than 2.5 million employees in the U.S.

Rochester, N.Y.-based Paychex, meanwhile, has over 745,000 business clients in the U.S. and Europe that use its platform to manage and pay more than 10 million employees.

By the numbers: Paycor has a $3.3 billion market cap, compared with Paychex's $50 billion market cap.

In its most recent fiscal year, Paycor's revenues increased 19% year over year, to $655 million, while adjusted operating income grew 17%, to $112 million.

That's compared with Paychex's $5.3 billion in revenue and $2.2 billion adjusted operating profit in its most recent fiscal year.

Between the lines: Paycor's largest shareholder is private equity firm Apax Partners, which invested in the company in 2018.

Paycor later went public in 2021 at a $4.8 billion valuation.

State of play: Paychex isn't alone in its M&A pursuits in the HR tech sector.

In October, payroll behemoth ADP agreed to acquire WorkForce Software for an estimated $1.2 billion.

Paycor and Paychex have not yet responded to requests for comment.

Paychex in talks to acquire Paycor: Report

Consolidation continues in the SME payroll sector.

Illustration of business people shaking hands on top of a stack of coins. 

Paychex (Nasdaq: PAYX) is in advanced talks to buy smaller payroll processing rival Paycor HCM (Nasdaq: PYCR), Bloomberg <a class="gtmContentClick" data-vars-link-text="reports" data-vars-click-url="https://www.bloomberg.com/news/articles/2025-01-05/paychex-is-said-to-be-in-talks-to-buy-smaller-rival-paycor?srnd=phx-deals" data-vars-content-id="9ca6575e-09e2-4448-90ae-9ba677be5258" data-vars-headline="Paychex in talks to acquire Paycor: Report" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.bloomberg.com/news/articles/2025-01-05/paychex-is-said-to-be-in-talks-to-buy-smaller-rival-paycor?srnd=phx-deals" target="_blank">reports</a>.Why it matters: The highly fragmented SME HR and payroll sector could see M&amp;A activity drive consolidation.

Paychex in talks to acquire Paycor: Report

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