(Bloomberg) -- Paychex Inc. is in advanced talks to acquire Paycor HCM Inc., a smaller rival in payroll processing, according to people with knowledge of the matter.
A deal may be announced as soon as this week, said the people, who asked to not be identified because the details aren’t public. Nothing has been finalized and talks could still fall through, the people added.
Representatives for Paychex and Paycor didn’t respond to requests for comment on Sunday outside regular business hours.
Shares of Paycor jumped as much as 24% in premarket trading on Monday following the Bloomberg News report. Paycor had a market value of $3.3 billion at Friday’s close while Paychex’s equity was valued at more than $50 billion.
The deal would bring together two major players in the market for human-resources software and services, a fairly fragmented market experiencing recent consolidation. Getting bigger through deals allows for cost cuts when bundling more services to customers in need of payroll management, as well as help administering benefits and on-boarding new workers, among other needs.
The consolidation in the market is inevitable, though a potential deal would be a surprise given the companies have client overlap and platform duplication, according to TD Cowen analyst Jared Levine.
Automatic Data Processing Inc., the dominant payroll services provider, agreed in October to acquire WorkForce Software, which helps companies manage bespoke compensation needs.
Paycor’s cloud-based software helps small and medium-sized businesses automate and streamline their human-capital and payroll needs and is used by more than 30,000 customers in all 50 US states, according to its website. The Cincinnati-based company’s largest shareholder is an entity controlled by private equity firm Apax Partners, according to data compiled by Bloomberg. Apax declined to comment.
The potential acquisition would mark the largest deal to date from Rochester, New York-based Paychex, which offers human resources, employee-benefits, insurance and payroll services to more than 745,000 customers in the US and Europe.
--With assistance from Ryan Gould and Subrat Patnaik.
(Updates with Paycor share moves in fourth paragraph and analyst comment in sixth paragraph.)
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