Following a successful Series A extension funding of $9 million in late 2024, Nigerian HR Software-as-a-Service (SaaS) company SeamlessHR engaged in preliminary discussions with competitor PaidHR regarding a potential acquisition. Despite the informal nature of the talks, they did not progress to a formal offer or agreement, as confirmed by sources familiar with the matter.
According to an individual with insight into the discussions, who preferred to remain anonymous due to the sensitive nature of the talks, SeamlessHR initiated the informal conversations in the fourth quarter of 2024 but did not receive a positive response.
Formal acquisition offers typically involve submitting an indication of interest (IOI), while informal discussions often occur without any formal documentation. In this case, no formal IOI was presented.
Instead of pursuing acquisition opportunities, PaidHR has chosen to concentrate on its rapid growth trajectory. Since its inception in 2020, the company has quickly expanded its services to more than 200 businesses, including prominent Nigerian companies like Flutterwave, Oando, and Mavin Group.
In 2023, PaidHR processed ₦11 billion ($77 million) in client salaries, a substantial increase from ₦2.7 billion ($18.5 million) in 2022. The company has also made significant investments in cross-border payroll technology, which is considered a distinct competitive advantage.
An acquisition would have allowed SeamlessHR, established in 2018, to strengthen its position in the highly competitive HR-tech sector. A successful deal would have provided SeamlessHR the opportunity to incorporate PaidHR’s customer base in a domain where acquiring customers is costly and switching costs are high.
Both companies refrained from providing comments on the issue. However, SeamlessHR did confirm that no formal acquisition discussions transpired.
The Nigerian HR-tech industry has experienced growing fragmentation, with companies such as BizEdge, PaidHR, Motherboard, Bento Africa, NotchHR, and Ropay competing for market share. This increased competition has made it challenging for a dominant market leader to emerge, although there have been notable advancements in the sector.
The cross-border payroll system offered by PaidHR, which allows companies to pay employees in different countries using local currencies, has been a standout feature. Within a short span of 10 weeks after its launch, it contributed 9% of PaidHR’s revenue, as shared by a company executive requesting anonymity.
SeamlessHR’s outreach was largely influenced by PaidHR’s cross-border capability, which would have complemented SeamlessHR’s existing product suite encompassing HR management, performance management, leave and payroll management, recruitment, and HR analytics.
Moreover, the broader HR-tech landscape in Nigeria is increasingly seen as ripe for consolidation. With over 20 companies vying in a competitive market, experts in the industry believe that reduced fragmentation would benefit the sector.
“The HR Payroll space will benefit from consolidation,” shared the CEO of an HR-SaaS startup anonymously. “The ecosystem would be better served by a few larger companies capable of delivering high-quality services, as opposed to numerous small ones that may struggle to scale.”
Nevertheless, other industry insiders caution that the HR-tech space in sub-Saharan Africa may not be ready for consolidation yet. “Most players in the region are still in the early stages of product development,” mentioned another HR-SaaS CEO who also preferred anonymity. “For consolidation to be successful, companies need to have achieved product maturity.”
The acquisition of South Africa’s PaySpace by Deel was feasible due to the former’s extensive operational history, spanning over two decades, allowing for product refinement and the establishment of a mature offering.