Buy-and-Build Strategies in Human Capital Management

The increasing importance of digitalised and automated processes following the outbreak of COVID-19 is probably best summed up by an infamous LinkedIn post with the question:

“Who led the digital transformation of your company?”
a. CEO
b. CTO
c. COVID-19

Working from home has forced many HR departments to adopt more software-focused approaches to HR and Payroll. Processes previously done in person and/or in generic tools such as Excel are now digitised. While software is an obvious beneficiary from the pandemic, there is also an increased demand for HR services in order to navigate the complexity of various government schemes which seem to be changing so quickly, that anyone who wants to actually focus on running their business might have to look for some external help. In this article we will examine some of the software and service led PE-backed transactions in the UK HCM space.


M&A in the UK HCM software space has recently been dominated by the two PE-backed software giants IRIS (HG Capital) and The Access Group (TA Associates). These two alone have been responsible for 33 acquisitions since 2015. Fairgrove recently provided vendor customer due diligence services for time and attendance software specialist Mitrefinch, which was acquired by Advanced (backed by Vista and BC). All three companies continue to follow an expansive acquisition strategy of buying high growth HCM software businesses in order to increase scale and expand their service offering to capture a greater share of the employee lifecycle.


While software is the obvious area for growth in the HCM space, there is also a big opportunity in services. However, one has to look beyond the mature domestic payroll market towards more nascent markets such as multi-country payroll and global PEO/EOR services. Combining domestic payroll with an international capability can be a potent combination, with the higher growth potential of international, and the customer stickiness of domestic payroll.

A textbook example of this strategy is Tenzing’s investment in FMP Global. In 2016 Fairgrove advised Tenzing on its acquisition of Bond Payroll’s domestic payroll (BPS), international payroll (FMP) and payroll software (Payrite) divisions. The combined entity was called FMP Global. Over the next few years, it acquired three businesses to add scale and increase the service offering. Firstly, US HR consultancy MCN, then the payroll division of the UK advisory firm PKF and in January 2019 its Canadian MCPO in-country partner PSI. This made FMP an attractive acquisition target with domestic and international HR/payroll capability and access to the high growth MCPO market. In 2019 Tenzing sold FMP Global to IRIS Software Group, generating a 5.4x return.

Following the successful exit with FMP, Tenzing has launched another series of acquisitions in the payroll space. In December 2019 it acquired three payroll related companies to create the Payroll Software and Services Group. The acquisitions follow a similar narrative to the FMP playbook. It includes a domestic payroll bureau (Trace), a software focused payroll bureau (Cintra) and an international HR specialist (UnaTerra Consulting). In January 2020 Tenzing also acquired MCPO provider Activpayroll.  It is almost a carbon copy of the FMP story, combining domestic and international HR and payroll competency. However, there is one notable difference which could be the key factor in driving another successful exit: exposure to the high growth global PEO/EOR market via UnaTerra Consulting.

Selected UK Payroll / EOR Assets owned by PE Funds

CompanyPE OwnerDate of InvestmentCompany DescriptionRevenue Latest YearEBITDA Latest Year
PEO WorldwideHorizon CapitalDec 2020Global PEO / EORn/an/a
TopSourceHorizon CapitalDec 2020Payroll services & EOR£7.3mn/a
ActivpayrollTenzingJan 2020MCPO£23.6m£7.7m
Cintra HRTenzingDec 2019Payroll software / servicesn/an/a
Trace PayrollTenzingDec 2019Payroll services£2.8m£0.2m
UnaTerra ConsultingTenzingDec 2019Global PEO / EORn/an/a
The Payroll Services CompanyTA Associates (via Access Group)Nov 2019Payroll servicesn/an/a
FMP GlobalHG Capital (via IRIS)Aug 2019MCPO, Payroll software / services£20.4m£6.2m
Zellis (inc Moorepay)Bain CapitalOct 2017Payroll software / services£152.4m£33.6m
Note: Revenue and EBITDA values per statutory accounts. Cintra HR, PEO Worldwide, The Payroll Service Company, and UnaTerra Consulting have filed abbreviated accounts with no P&L information. TopSource published revenues but not EBITDA.

Global PEO / EOR

Global PEO/EOR businesses help other businesses expand overseas without the headache of setting up a subsidiary and getting up to speed on local labour laws. They provide employer of record (EOR) services where the global PEO/EOR employs individuals on behalf of the client, taking responsibility for all formal employment tasks and liabilities. It is one of the fastest ways for a company to launch its operations in a new market. Ten years ago, the EOR market was in its infancy, but is now forecast to grow at 30% p.a. from $306m in 2019 to $1.1bn in 2024. The largest global player, Globalization Partners, has grown at 88% p.a. from 2016 to 2020. The sector has also attracted a significant amount of funding with Globalization Partners recently closing a $150m funding round and Papaya Global raising $90m in the last twelve months. Anyone looking to build an attractive HCM services business should at least consider adding some sort of global PEO/EOR competency to its service offering.

Using a Global PEO / EOR


Multi Country Payroll Outsourcers (MCPOs) enable clients to outsource their payroll processing across multiple geographies. There are several operating models for MCPOs. Providers with an end-to-end single platform use in-house processes to manage payrolls for their clients. In an aggregated model MCPOs use in-country partners who process the payrolls on behalf of the MCPOs in specific geographies. Most MCPOs use a hybrid approach with in-country capability in some geographies while relying on partners in others. Everest Group estimates the global MCPO market to be worth $2.5bn p.a. and expects it to grow at 15%-20% p.a.

MCPO Organisational Structure

Our Experience

Beyond the involvement with FMP and Mitrefinch, Fairgrove has recently supported Horizon on a series of transactions in the payroll and global EOR space. These included TopSource, a UK payroll bureau with EOR capabilities and PEO Worldwide a global EOR provider. By combining the two entities, Horizon has created a global employment solutions group with domestic and international payroll capability as well as global PEO/EOR competency.

In an ideal scenario, a group could end up first servicing a client’s payroll domestically. Then it could help that client expand overseas via EOR services. Finally, once the client is established in the new market, the group could service the payroll in the new market as well in an MCPO framework. The group could therefore service a company at three different stages of its internationalisation process. This is a unique service offering that could be interesting to acquirers in the global HCM space.

If you are an investor looking to understand the HCM market further, or an investor considering an opportunity, please contact Paddy Woods Ballard or Patrick Woodrow for further information.

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