Intuit-PayCycle: A kind of homecoming

by Brenon Daly

Looking at Intuit’s acquisition of PayCycle Inc, we might note that the alumni network can pay off – and pay off big. Intuit picked up the payroll services startup earlier this week for $170m in cash. We understand that PayCycle generated only about $30m over the previous four quarters, meaning Intuit paid an estimated 5.7x sales. (Granted, by looking solely at revenue, we’re arguably shortchanging PayCycle. The company, which has some 85,000 customers, sells its payroll services on a subscription basis, meaning revenue substantially lags actual contracts it has billed.) In a somewhat unusual mandate, Goldman Sachs advised Intuit, while Lane, Berry & Co., now owned by Raymond James & Associates, advised PayCycle.

There are a number of connections between Intuit and PayCycle. The Palo Alto, California-based startup was founded by a pair of former Intuit executives (Martin Gates and Rene Lacerte) who then turned the company over to Jim Heeger, Intuit’s former chief financial officer. Also, board member David Hornik of August Capital formerly drew a paycheck from Intuit, as did fellow investor Tom Blaisdell of DCM.