Intuit Tight-Lipped About PayCycle Acquisition's Impact on Credit Unions
Intuit, the Mountain View, Calif.-based financial management giant and maker of such popular products as Quicken, QuickBooks and TurboTax, recently announced that it had signed an agreement to buy PayCycle in a cash transaction deal worth approximately $170 million.
Launched in 1999, the Palo Alto, Calif.-based PayCycle was founded by former Intuit employees Ren? Lacerte and Martin Gates. According to PayCycle's Web site (www.paycycle.com), the two, who played a part in leading QuickBooks into the payroll services area, decided to start their own company. Privately held PayCycle now serves more than 85,000 small businesses through the incorporation of Intuit's flagship products. The company also has alliances with credit unions.
The acquisition will give small businesses online payroll and provide thousands of accountants with the ability to act as stand-alone payroll providers for their small business customers, according to Intuit. The transaction is scheduled to close during the third quarter. Intuit said it expects the acquisition to reduce its GAAP earnings by approximately two cents per share in the fourth quarter of fiscal 2009 and does not expect the acquisition to have a material effect on fiscal 2010 earnings.
After the transaction is completed, Palo Alto, Calif.-based PayCycle will become part of Intuit's small business group. PayCycle CEO Jim Heeger will serve as a strategic adviser to Intuit for six months to help ensure a smooth integration of the two companies. Intuit said it had annual revenue of $3.1 billion in fiscal 2008. The company has approximately 8,000 employees in the United States, Canada, the United Kingdom, India and other locations.
When contacted by Credit Union Times, Intuit spokeswoman Holly Perez did not respond to questions about how Intuit's acquisition of PayCycle would impact the online payroll provider's credit union clientele. PayCycle spokeswoman Julie McHenry did not want to discuss the impact either.
"At this time, we don't have anything to elaborate on beyond what was referenced in our press release," Perez said. "We can share more details once the transaction closes in the third quarter of calendar year 2009."
In a June 2 press release, Heeger said the two companies' strengths complement each other.
"We share a common vision: using the Internet to deliver a secure and easy-to-use payroll solution to small businesses," Heeger said. "Like Intuit, our employees are proven innovators and industry thought-leaders who develop and deliver game-changing offerings that redefine traditional ways of doing things."
Nora Denzel, senior vice president and general manager of Intuit Employee Management Solutions, said, "The acquisition will enable Intuit to develop and deploy the next generation of online payroll tools more quickly."
In 2005, PayCycle partnered with NCR Corp.'s eCommerce organization to provide its small business users access to its payroll service directly from their Web sites. That same year, FedComp Inc., one of the largest providers of data processing and credit union accounting systems, also aligned with PayCycle to provide service to its more than 1,100 credit union users.
Intuit's purchase of PayCycle could be a win for credit unions, said Jim Jessee, director of operations at FedComp.
"You can't go wrong with the name like Intuit," Jessee said. "Think about all the businesses out there-from the small doughnut shop to larger companies-that use Intuit. I think [the acquisition] would be a good thing."
FedComp, which counts credit unions with assets as small as $500,000 to those in the $70 million-and-up range among its clients, has a referral alliance with PayCycle that allows it to integrate its general ledger for better automation, Jessee said.
"We would love to say we have more volume, but with the corporate stabilization, we're finding that some credit unions are doing payroll on their own," Jessee pointed out.
Intuit and PayCycle's reach also extends even further into the industry. Digital Insight, an Intuit company, provides online banking services to credit unions and mid-size banks. Payroll capabilities are already a part of both Digital Insight's Small Business FinanceWorks solution and its Business Solutions platforms, according to Tobin Lee, senior manager of Intuit corporate communications.
"Things are business as usual for our client financial institutions," Lee said. "Until the transaction with PayCycle is closed and integration of the company with Intuit is underway, please understand we cannot comment further on potential synergies."