Intuit buys online payroll provider for $170 million

Intuit has agreed to buy online payroll provider PayCycle for US$170 million in a move to expand its software-as-a-service offerings for smaller businesses, Intuit said Tuesday.

PayCycle is based in Palo Alto, California, and provides online payroll services to about 85,000 small businesses in the U.S. It was founded in 1999 by two former Intuit employees and says its mission is to "make paper-based payroll obsolete."

PayCycle already integrates with Intuit's QuickBooks software. It is also offered as an option with Microsoft's competing Money software, and it was unclear Tuesday if that will still be the case after Intuit completes its acquisition.

Intuit said the purchase will help it to expand its own payroll offerings and further its move into the SaaS market.

Intuit will offer the service to small businesses directly, and also through accountants and financial institutions. It faces a growing list of competitors offering online payroll, including Sage, NetSuite, MPay, CompuPay and Paychex.

Intuit expects the cash transaction to close in the third quarter, when PayCycle will be made part of Intuit's small business group. PayCycle CEO Jim Heeger, a former Intuit CFO, will stay as an adviser for six months to help integrate the two companies.

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