Paylocity acquires corporate startup Airbase for $325 million

Payroll software company Paylocity has agreed to acquire enterprise startup Airbase for $325 million, the companies said Wednesday.

The transaction is subject to regulatory approvals and is expected to close in the first or second quarter of Paylocity’s fiscal year, which will occur within the next 30 to 60 days.

It’s a decent outing for seven-year-old Airbase, which was founded by Thejo Kote in 2017 to provide software to midsize businesses looking to better manage their expenses. Its platform included bill payments, corporate cards and employee reimbursements, among other things.

The San Francisco-based fintech company has raised just over $100 million in equity since its inception from investors like Menlo Ventures, Bain Capital and First Round Capital, among others. According to PitchBook, Airbase was valued at $600 million after raising capital in 2021, at the peak of the market.

Based in Schaumburg, Illinois, Paylocity is a publicly traded company and, according to Yahoo Finance, has a current market cap of just under $9 billion, with about 40,000 customers. The company said in a statement that the addition of Airbase will help it expand its total addressable market beyond human capital management (HCM) and “farther into the CFO’s office.”

Kote told TechCrunch that the decision was not easy, but ultimately proved to be the right one.

“Airbase has many years of experience and a clear path to profitability, but I was ultimately drawn to the fantastic opportunity to create a unified HCM and finance platform for mid-market businesses – leveraging the size and scale of Paylocity to bring Airbase to a much broader audience.”

A source familiar with the deal, who asked not to be identified, told TechCrunch that the structured transaction does not include all of the cash on Airbase’s balance sheet, which goes back to the company, shareholders, and employees. Including that, the total value of the deal is actually “a little less than $400 million,” the source said.

Airbase has just over 300 employees. It’s not yet known how many of them will join Paylocity. The company has competed with the likes of Ramp and Brex for years, focusing on selling software from the get-go. At one point, the company said it had topped “eight figures” in annual recurring revenue (ARR), although it didn’t provide an exact number.

This is not the first departure for Kote, who sold Automatic to SiriusXM in 2017 for more than $100 million.