Paychex Inc. has signed a definitive agreement to acquire payroll company Paycor HCM Inc. in a deal that would bolster its employer client base for services including payroll and workplace retirement plans.

The agreement, announced Tuesday, has teed up Paychex to add Paycor’s 49,000 clients and 2.7 million employees to its client base in an all-cash transaction for $22.50 per share, or $4.1 billion in value. The deal, subject to closing terms and approvals, is expected to close in the first half of 2025 and has approval from both companies.

With the acquisition, Paychex’s total addressable market, or TAM, would increase by $10 billion to $100 billion, according to a presentation posted on its investor website. Paychex’s current client base comprises 745,000 customers across the U.S. and Europe for services including payroll, human capital management tools and insurance.

The deal will also allow Paychex to offer more clients its retirement services that include 401(k) plans, pooled employer plans, multiple employer plans and solo 401(k)s, among others. The firm is administering more than 120,000 401(k) plans with 1.5 million participants, according to the presentation.

Paychex noted that the deal would also create “significant opportunity to cross-sell multiple products bi-directionally between Paychex’s and Paycor’s customer bases.” Rochester, New York-based Paychex also noted that acquiring Paycor would add capabilities in an artificial intelligence-powered suite of human capital management and payroll tools, strength in workforce management, talent management and talent acquisition.

David Grossman, an analyst at Stifel Nicolaus who covers Paychex, reiterated a hold rating on the company after the announcement. He wrote in an analyst’s note that the deal has several strategic benefits, but also brings some financial uncertainty in the transaction, particularly in the short term.

Paychex and Cincinnati-based Paycor are listed on the NASDAQ stock exchange. Private equity firm Apax Partners LLP had held a majority stack in Paycor; the firm announced Tuesday it would be selling its stake as part of the deal.

“This acquisition represents a significant milestone in our journey to provide best-in-class HCM solutions to businesses of all sizes,” John Gibson, president and CEO of Paychex, said in a statement.

Paychex has been leaning into its PEP offering in recent years as a way to offer small businesses a potentially cost-efficient, less burdensome 401(k) plan to employees.