PayGroup Limited (ASX:PYG) announced on 04 November that it had entered into a binding Share Purchase deal to acquire Payroll HQ Pty Ltd. The shares on the day started trading higher but ended the session flat at A$0.55. On 5 November 2020, PYG shares were trading at A$0.545 (at AEDT 01:09 PM), down 0.910% from the last close. PayGroup Limited has a market cap of ~A$42.21 million.

Headquartered in Melbourne, PayGroup (ASX:PYG) is a specialist provider of payroll and human capital management solutions. It is the holding Company or PayAsia, TalentOz, and Astute One.

The Company signed a binding Share Purchase Agreement to acquire the overall shares in Payroll HQ Pty Ltd for the total consideration of A$2.535 million. The amount would be payable via the issue of 4,122,694 PayGroup shares at A$0.615. Another earn-out of approximately A$1.28 million is likely to be attained based on the FY2021 forecast revenue of Payroll HQ. The earn-out would be fully paid via the issue of PYG shares at the same price. The new shares issued would be escrowed for 24 months.

PayGroup Managing Director Mark Samlal said the Payroll buyout will "significantly transform" PayGroup's SwaS presence and sales capabilities in Australia.

"Payroll HQ has an excellent client base and sales pipeline, and is led by a group of experienced and high-performing industry experts," Mark said.

"In this current environment, when payroll is so critical to the livelihood of workers, and cost efficiency and agility is a crucial element for all businesses in a post-lockdown economy, we see significant opportunity to grow this business and we welcome the Payroll HQ team on-board," he said.

Payroll CEO Ross Heron shared similar sentiments.

"We see real benefits of integrating our business with PayGroup and have already identified many of their product lines - such as Treasury Services and HCM SaaS modules - as being highly attractive to our client base," Ross said.

"The HCM outsourcing market is experiencing rapid growth in Australia as business requirements have fundamentally changed following the COVID-19 challenges of 2020 and its impact on workforces," he said.

"We believe that working together with PayGroup will put us in the best position to capitalise on post-pandemic business opportunities."