Deel is on an acquisition spree. On Tuesday, the HR startup announced that it is acquiring the African HR software and services company PaySpace in a deal that marks its largest acquisition to date.
The move comes less than a week later Del announced that he had took over Munich-based Zavvyone AI-powered startup “people development” tools for personalized career development, training and performance management.
Financial terms of the PaySpace acquisition were not disclosed.
Johannesburg-based PaySpace has more than 14,000 customers using its software and services in 44 countries throughout Europe, Latin America, the Middle East and Africa. Clients include multinationals in various industries such as Heineken, Coca-Cola Beverages and Puma Sports SA. For Deel, a $12 billion HR startup that facilitates recruiting, paying and managing talent in more than 70 countries, the acquisition offers an opportunity to strengthen its footprint in Africa.
Although PaySpace secured undisclosed funding last year from Sage subsidiary Netcash, a payment solutions provider specializing in debit orders and salary payments, it doesn’t fit the mold of a typical venture-backed startup and is very much a success story.
Brothers Bruce, Clyde and Warren Clark, along with George Karageorgiadis, founded PaySpace in 2007 as a cloud-based payroll and HR platform with the goal of streamlining the laborious payroll and backup processes associated with traditional payroll software and manpower prevailing at that time.
Within three years of its inception, PaySpace has expanded its product reach to 11 countries. By 2022, this footprint had expanded to 43 countries. That year, company executives announced plans for further expansion into Brazil and the U.K. Sales of the 20-year-old company — whose clientele includes international and local blue-chip clients ranging in size from one-person shops to businesses with thousands employees – are growing over 30% annuallyaccording to CEO Sandra Crous recently interview with financial minds.
Separately, San Francisco-based Deel also disclosed on Tuesday that it has surpassed $500 million in annual recurring revenue (ARR). organically, except for this acquisition. This is from $290 million in ARR at the end of 2022. Deel also claims to be EBITDA positive as of September 2022 and still has $600 million in the bank. IPO plans are still a long way off, but are likely to be in the 2025/2026 timeframe, Bouaziz told TechCrunch last week during the Zavvy acquisition.
A boost to Africa and business
The news also follows Deel’s acquisition of APAC payroll provider PayGroup. With the various purchases, Deel claims it now owns the full HR stack — entities, local teams (legal, HR payroll) and local payroll engines — across six continents. PaySpace built 45 engines over the past 15 years, according to CEO and co-founder of Deel, Alex Bouaziz. of Deel four year ambition is to serve 100 countries with native payroll engines.
“We were their customer, running payroll in 10 countries using PaySpace.” Bouaziz said in an interview with TechCrunch. “Us internal team was dying to get them and be able to do on-site calculations. Theirs is one of the best technologies we’ve ever seen… We had to do a lot of convincing.”
In a written statement, the Director of PaySpace Clyde van Wyk said: “Like PaySpace, Deel is trying to evolve its offering through disruption. We set out to modernize the payroll industry, which was burdened by manual processes and stringent regulatory and compliance requirements, as Deel revolutionized global recruitment.”
Deel now owns over 150 entities worldwide and manages in-house in-country payroll teams in over 70 countries, in addition to offering Employer of Record, contractor, immigration, HRIS and performance management services.
“One of the key things when you run payroll typically the way we have is working with local software engine calculations and taxes, you have to integrate with the best payroll software,” Bouaziz said. “But there’s nothing like having your own technology. We went from two engines to five engines and now to over 50 with the acquisition of PaySpace.”
For its part, Deel is making a big push into the business, which it believes PaySpace will also help. Before the purchase, Deel had 25,000 customers, including Klarna, Shopify and Hermes. Some of the clients may overlap, but the combination will effectively increase its client base quite significantly.
Details aside, the deal highlights a notable trend over the past 18 months: the third takeover involving companies founded in Africa and international counterparts.
Last January, German vaccine maker BioNTech acquired headquarters in London Launch AI InstaDeep, who hails from Tunisia, for £562 million. In June, private equity firm Medius bought Expensyaan expense management startup based in Tunis and Paris, for more than $100 million, according to sources familiar with the transaction.
Also in 2020, Stripe specifically acquired Paystacka startup from Lagos, Nigeria that, like Stripe, provided a quick way to integrate payment services into an online or offline transaction.
Want more fintech news in your inbox? Subscribe to TechCrunch Fintech here.
