In a strategic move that could reshape the HR technology landscape, Deel, the San Francisco-based HR software startup valued at an impressive $12 billion, is mulling over the idea of acquiring its competitor, Papaya Global. Insider has gained exclusive access to a letter penned by Deel’s Chairman and CFO, Philippe Bouaziz, revealing the company’s contemplation of this significant acquisition.
Exploring the Letter’s Contents: A Glimpse into Deel’s Interest
Philippe Bouaziz’s letter sheds light on Deel’s growing interest in Papaya Global. Bouaziz expressed a prolonged fascination with the competitor, stating, “The Deel leadership team and I have been following Papaya Global for quite some time now with great interest.” He went on to reveal that Deel is actively seeking to deepen its understanding of Papaya Global in the coming months and potentially formulate an acquisition offer.
While Deel’s leadership and aspirations for the acquisition have been unveiled through the letter, Deel’s spokesperson declined to comment further on the matter. Conversely, a spokesperson for Papaya Global issued a statement asserting that the company is not up for sale.
A Glimpse at Papaya Global and Recent Developments
Papaya Global, an Israel-based payments processing startup, made headlines by securing a valuation of $3.7 billion in 2021 following a funding round led by Insight Partners and Tiger Global. However, the company found itself embroiled in an unconventional public dispute involving its CEO, Eynat Guez, and one of its significant investors, Dovi Frances, a founding partner of venture capital firm Group 11.
The dispute ignited when Guez threatened legal action against Frances, citing defamation, after he criticized her decision to withdraw the company’s funds from Israeli bank accounts to protest the country’s judicial overhaul. Frances retaliated by threatening to offload his considerable stake in Papaya Global, amounting to 2.8% of the company, at a substantial discount. While the offer came with an expiration date, it was eventually rendered irrelevant by Papaya Global’s spokesperson.
Deel’s Strategic Intentions and Potential Scenarios
Bouaziz’s letter not only revealed Deel’s interest in acquiring Papaya Global but also explored potential scenarios. Deel expressed interest in acquiring Group 11’s position and possibly extending the acquisition to other investors, encompassing up to 10% of the company’s overall issued and outstanding shares, valuing it at approximately $520 million.
Moreover, Bouaziz hinted at the possibility of a complete takeover of Papaya Global, contingent on the approval of the latter’s board. He emphasized the potential for synergies between the two companies, notably suggesting that Papaya Global could leverage Deel’s comprehensive in-house HR global infrastructure.
Deel’s Ascension and Impact on HR Technology
With over $650 million in funding and a workforce of more than 3,000 employees, Deel has rapidly become one of the fastest-growing software-as-a-service startups in history. Deel’s software is designed to facilitate payroll management, employee onboarding, and other HR functions, counting prominent names such as Nike, Shopify, Rebook, and Goldman Sachs among its clients. A roster of notable investors, including Andreessen Horowitz, Emerson Collective, and Y Combinator, have supported Deel’s impressive journey.
Earlier this year, Deel found itself in the spotlight when concerns were raised about its utilization of independent contractors. Subsequently, lawmakers, including Adam Schiff, called for an investigation led by the acting US Labor Secretary, Julie Su.
As Deel contemplates the acquisition of Papaya Global, the HR tech landscape stands on the precipice of transformation. This potential acquisition could not only reshape the industry but also underscore the critical role technology plays in modern workforce management. As the situation unfolds, industry insiders and stakeholders eagerly await the next steps, which could potentially shape the future of HR technology and global recruitment practices.