Sage Buys SMB Cloud Payroll Software Provider PayChoice

Enterprise resource planning (ERP) software developer Sage Group said it has purchased PayChoice, a privately held, $39 million provider of cloud-based payroll and human resource services aimed at SMBs, for $157.8 million.

Through the purchase, U.K.-based Sage, which maintains a North American operation, not only strengthens its existing position in the U.S. payroll market, it also adds heft to its move to the cloud by leveraging PayChoice’s software-as-a-service platform.

PayChoice’s Encore payroll platform, which the company launched in 2011, is available both in mobile and web-based applications. The company sells its payroll and HR services to some 100,000 SMBs through a direct sales force and channel partners.

The acquisition is expected to close at the end of October, officials said.

For Sage the deal delivers a set of new customers, the opportunity for cross-selling to the combined installed customer base of both companies and a subscription-based recurring revenue stream from the profitable PayChoice, said Pascal Houillon, Sage North America chief executive.

"PayChoice is an excellent business, with a strong management team, attractive cloud platform and a proven business model based on supporting the needs of small and medium-sized businesses and licensees,” he said. “We are excited about the growth opportunity that the combination of Sage and PayChoice creates in this market and delighted to welcome the management and staff of PayChoice to Sage."

PayChoice charges companies with up to 10 employees a flat rate of $49.95 for self-service payroll while businesses with larger employee rolls can outsource their entire payroll operations at a higher rate.

"PayChoice is thrilled to become a part of Sage,” said Robert Digby, PayChoice chief executive. “We already share so many synergies: our heritage of supporting SMBs, our culture, our emphasis on customer experience, and our focus on accountants and financial institutions. This is a great move for our company and we see nothing but tremendous opportunity in the future."

The 24-year-old PayChoice employs 260 people in 16 offices throughout the United States with its main headquarters located in Mt. Laurel, New Jersey.