Shares of Paycor HCM (NASDAQ:PYCR) surged 23.2% to $22.85 in premarket trading following a Bloomberg News report that Paychex (NASDAQ:PAYX) is in advanced talks to acquire the smaller payroll processing rival.
If these gains hold, Paycor shares could open at their highest levels since October 2013.
The potential deal, which could be announced as soon as this week, would see Rochester, New York-based Paychex, with a market capitalization of approximately $50 billion, acquire Cincinnati, Ohio-based Paycor, valued at around $3.3 billion as of Friday, according to LSEG data.
Despite the potential for significant market movement for Paycor, Paychex shares saw a slight dip of 0.3% to $139.20 before the bell.
The potential acquisition has raised some eyebrows among analysts.
TD Cowen noted the client overlap and platform duplication between the two companies, calling the deal a surprise.
However, they suggested Paychex might be acting opportunistically, "evaluating an undervalued asset."
TD Cowen maintains a "buy" rating on PYCR with a price target of $22.
This potential deal comes after a contrasting year for the two companies’ stock performance.
In 2024, PYCR shares lost 14%, while PAYX shares rose approximately 18%.
While a deal is possible, sources cited in the Bloomberg report cautioned that nothing is finalized and talks could still fall through.