I Drove 3 Hours to See Inside a $3B PEO Acquirer (Here's What I Found)

I drove 3 hours based on a 15-minute call with a CEO of a company doing nearly a billion dollars in revenue with no agenda, no idea what I was walking into, just me, a full charge on the Tesla, and a lot of curiosity. In this episode, I'm going to break down exactly what happened at my meeting with the CEO of Venture Employer Services. Welcome to Payrollin', the show where you will learn how to operate and grow your payroll business from the most dynamic minds in the business. If your company offers payroll services, this is the podcast for you. And now, here's your host, Matt Vadie. Let's go! Today is one of those episodes I've been sitting on for a minute because honestly there's a lot to unpack and I wanted to make sure I did it right. Uh, this is a follow-up to the Venture episode I recorded, I, I guess 4 or 5 episodes ago. If you haven't heard that one, go find it and listen to that one first. I'll link it in the show notes. But the short version is Venture Employer Services hit their 100th acquisition, and this piqued my curiosity. I very rarely do these sort of industry deep dive episodes but this one was just too hard to ignore. 100 acquisitions, such an insane number, such a crazy amount of consolidation for the PEO space that I had to dig deeper. And I found some old interviews with Alex Campos and Gary Noak where they basically laid out this plan in 2022. And this was a podcast that very few people heard. And so the industry, anytime I talk to somebody about this organization, I hear different pontification about what they may or may not be doing. However, when I went back and listened listen to that episode, they laid it out succinctly exactly what the plan was, exactly what the strategy was, and then they're executing. So anyhow, I record this episode and it somehow made its way onto Alex's desk, which I actually had feared and/or planned for in the respect of maybe the most diligence I've ever done for an episode and that I didn't want to get any details wrong because I had a sneaking suspicion this would end up in their leadership team's hands. But he reaches out, says he enjoys the podcast, gives me the opportunity to fact-check everything. He said I was quite accurate. So if you are curious as to the accurate privacy level of that episode. It was pretty spot on. But we get on the phone on a Thursday evening, about 8, 9 o'clock, casual conversation, talk for about 15 minutes. And he says, Matt, I want to have you come out to our headquarters. You can have a peek behind the scenes. I will open up the kimono. I'll show you everything. You can share about it on a show. You cannot share about it. I'll tell you if there's anything I don't want on the air, but just come on out and we'll show you everything we're doing with AI as well. And I'm going to get into that on the backside of the episode, just some of the really cool things the organization is doing with AI. But so, you know, on a wing and a prayer, I'm just like, hey, Of course I'll come out. If you get this type of invite, you want to go and get access. He didn't really give me an agenda of what he wanted from us. And in my head I'm thinking, well, obviously they want to acquire us. That's all they do is acquire companies. And I'm not looking to sell right now, but I'm very curious and I want that inside access just from a pure intellectual standpoint. So I get in the car and I drive 3 hours to find out. And I spent about half a day at their new headquarters about to open up. I guess it's their second, their East Coast headquarters. They have one in Arizona as well. And so I spend about a half day with him and his team. And when I get there, I walk in the door and there's a gentleman waiting for me in a conference room, Nate, fantastic guy. But the first thing I see up on the screen on the wall is all the logos of companies they acquire, and it's clearly their M&A deck. So I'm like, ah, validated. They do just want to acquire me. And so this will be easy. I'll sit through the pitch, I'll take some notes, and thanks but no thanks, maybe later. And It is what it is. But Alex comes in and sits down and says, you know, I say to him, why am I here? What are we doing? And he says, that's a great question. You're not here because we want to acquire you. We will if you want us to, but that's not why you're here. You're here because you're an influencer in the space and we want you to understand what we're doing and how we're executing over here, which I'll be honest is a super cringe thing to hear about yourself is to be called an influencer, especially in a space like payroll, you know, hashtag life goals. But so He goes on to say he'd like me to help spread the word about what they're doing on the M&A side. Obviously, they're looking for more targets. And I put it to him straight. I was like, look, I'm not going to be a shill for you. I'm not going to go out here and promote your business. If you'll allow me to share everything I see here today in the room and give my unbiased perspective on what I saw and what I understand about how you go about acquiring businesses and whether or not it's a good fit and who it's a good fit for,, then I'm happy to do it. And that's exactly what I'm doing right now. So if you're in the payroll space and either A, you just want to get executed on how this M&A process works for a large-scale organization with billions of dollars of backing, or B, you are interested in selling your bureau either now or sometime in the near future, you're going to love this episode. So let's go ahead and dive in, get a little details on where they're at. So what's this current state of the scoreboard for Venture? Well, when I did the last episode, and mind you, I think it's been 60 days tops, not even, maybe 45. They had just hit 100 transactions. By the time I walked into that conference room, they're at 105. Who knows how many more since then? It's probably been another 30 days since I was there. So there were 5 more deals in the 30 to 45 days from the time I recorded that episode to the time I set foot on site. And they are trucking along. Their goal is 18 to 24 deals per year. So a goal of 2 deals a month. They have 7 full-time people on the M&A team. When I was there, they had 8 deals currently in legal and 50 active deals in the pipeline. So from the time they sign an LOI to close is averaging 71 days. And that's pretty interesting to me. So LOI to close, 71 days. They've closed 51 deals between August of 2022 and the end of 2025. Revenue right now sitting around $750 million. You know, my notes say here they're looking at another capital raise after a specific deal closes houses, but they're actually— they have raised another round in the time since then. I found out in a phone call with Alex, you know, they've raised over $3 billion accounting at this point, and I'm losing track of that number. It's well over that with the most recent round. But so they're not in the business of slowing down at the moment. They want to continue to consume and acquire inside of the PEO space. They want to dominate that space. The proof positive of that is, look, there were 900 PEOs back in 2018. We are down to 500 PEOs today. Again, probably 90 of them being acquired by venture, and then we have other people in in the space who are also acquiring PEOs. It is definitely the way to go, is consolidation in that market right now. And it's going to be interesting. I mean, 40% of the industry is gone already. So where does this go? And Venture being one of the biggest drivers of consolidation, where do they go? And that's a question that I asked point blank, and we'll talk about here in a moment. So understanding how they operate really isn't an option for us as bureaus anymore. We've been seeing recently with valuations of public companies getting pushed down as a result of fears around AI and what that's going to do to their internal internal operations, their clients, the amount of companies they can serve, what it's doing to the workforce. We need to understand the business intelligence of how our big public and non-public largest players in the space are working. Let's go ahead and look at what one of their actual deals look like. And this is, you know, if you're here and you own a bureau, this is the part you're here for. Because if Venture comes knocking or you go knocking on their door, you need to understand what the deal structure looks like. And I was pretty surprised at the way they structure these deals. It's unique compared to what I have ever understood. Any of the larger players to do. So the way it works, and this isn't every deal, but this is the target that they go for, is they form a new LLC. Venture owns 80% of the LLC, you keep 20%. You're not cashing out and riding off into the sunset right away. You're staying in the game with a very large, well-resourced partner behind you. And their goal, what they say is they pay 160 to 180% of what the largest national player in the market would pay for your book of business. So they're not lowballing people. Again, this is what they've told me. If your experience differs, please by all means reach out to me. They're paying up because they want the seller to stay motivated and stay in it. They want both of you to win on the proverbial second bite of the apple, right? So they come in and they help you to grow that thing. And the way that they do that, and this is where it starts to get— I've talked to some people that have been on the inside, some people that have sold, and this is where it gets a little bit harder, right? Is they're going to come in and they're going to replace your entire back office, accounting, admin, payroll processors, customer service, they're going to consolidate all that and basically sell it back to you for a lower percentage than what you paid for it. So he used the example of 95 cents of the dollar, because you're going to have a P&L that you're going to be responsible for inside of that 80/20 split. So you're saving a little bit of money on the back office costs, you're getting it consolidated while getting a better resource operation. And your job is to go out and sell and grow top line business. And that's it. So you're selling, you're quoting, you're growing the top line, that's your lane, they handle everything behind you in terms of operations, etc. Now, what we have seen, and again, I mentioned it in the previous episode, is they like to keep the local office open. The model is, you know, ABC payroll by venture. So they want to keep that local boots-on-the-ground feel while consolidating the back office at corporate. So therefore you get the advantage of having local boots-on-the-ground salesforce who know the local market, but the backend resourcing. And so that's how they're effectively growing. Again, it's not just a grow-by-acquisition strategy, it's a land and expand on top of that. So once I acquire the book of business, I want it to grow in addition to that initial book I acquired. So if you got a sales team, they're going to keep that intact. Now, it's interesting here, the focus on— and this seems like the obvious thing to say— but the focus on retention. I mean, Alex really pounded into the ground the focus on retention, retention, retention, retention as it comes to clients. And why wouldn't it be, right? It doesn't do you any good to acquire a $10 million book of business and lose $5 million of it. So one of the things they've done that blew me away was they don't force you onto their platform. They don't force you on a Prism HR. So they're actually hiring or keeping support personnel for the platforms you're on, particularly the big ones. So they have UKG staff, they have iSolve staff, they have people internally so that they don't have to migrate the system when they come over in the acquisition. And that to me was very, very interesting. And it makes a lot of sense though, right? And they said, and I asked, well, what about some more of these fringe platforms? You know, I'm going to name some off, but what about some of these smaller fringe platforms. They said in those circumstances, we may force a migration, but 80% of the time we're going to keep them on the platform they're on, and we're going to either have staff available or retain some of their existing staff to help to serve that or train staff on that platform because we want to minimize the attrition during the transition process, which makes perfect sense. And then they have a division relations team, which is essentially a concierge department for sellers who've been acquired. So you've got your sort of dedicated person to navigate their hundreds and hundreds of internal people because they know it's a lot.. And if you've done it 105 times, you know where the friction points are and how to navigate those. So one more thing on the structure, they close about 40% of the deals they look at. 40% of the deals they look at, they close, which is pretty impressive. And 77% of the letters of intent that they sign make it all the way to, to the close. So if you bring your book of business to them, they're serious about getting a deal done and they have sort of a two-sided valuation. I mean, they're going to value you on EBITDA, but they also understand that the payroll industry is conditioned to be valued on top line. So they're going to translate the two and they're going to take it and give it to you and say, hey, it's, you know, 2x, 3x, 4x top line, whatever that number is. However, they're really going to be looking at EBITDA and how they can drive profitability inside of that book. They want a healthy book of business. I talk to founders in the payroll, HR, and accounting industry every single day, and they all tell me they need more of one thing. It's not more money. It's not more AI tools. It's more time. How do I get more time? Well, I hired a virtual assistant through OutsourceScale.com that helps me manage my inbox, manage my calendar, handles administrative tasks for me, helps support my marketing efforts, and much, much more. The cool thing about Outsource Scale is that they actually train the virtual assistants on the latest and greatest AI tools to make sure that they can only do that administrative work for you that you need to get off your plate, but they're doing it in the most efficient and effective ways possible. I've been so happy with my assistant from Outsource Scale that I've actually added multiple other teammates to our other companies through them. Their pricing starts at only $7.99 a month, and they make it super easy to get a new teammate onboarded and part of your team. Very quickly. Check them out today at outsourcesscale.com. Now, one of the things that hit me the hardest during this visit— and mind you, I sat through a 250-page slide deck. You're welcome, everybody— that I'm going to condense that down into just 20 to 30 minutes for you today. But just how systematized the whole operation was. Like, this is not a roll-up obviously you're hearing about the chaos and it's got to be chaos when you're doing 100 acquisitions, but you've also got to have an incredible amount of systems. And they showed me stage by stage by stage the effectively 1,200 tasks that have to occur from the time somebody signs an LOI until after those customers are onboarded and being well taken care of and what that looks like, who owns them, where are the checkpoints, who owns what. And they actually have this interesting thing where they start to go live 7 days before the deal officially closes. So once they're getting— everybody's got verbals, the contracts are getting ready to get signed— they actually start initiating the onboarding before the ink's even dry to make sure that the deal gets done effectively. They have 50 active deals in the pipeline, like we talked about. The biggest transaction they've ever done was Tandem HR. Shout out, Taro. What's up, friend? Hope you're doing well. They have a couple of other divisions that I thought were really interesting. Salvo— some of y'all probably use Salvo. I've heard their name getting kicked around at IPPA in the That's a BPO service. I was stunned by the scale of that organization with 45,000 offshore teammates running through it, 1,000 clients and $65 million in EBITDA. Man. So they cross-sell that among many other things into the client base. I mean, they showed me a slide at one point of, I think it was 63 different products. If you come in, you know, let's just say you enter the ecosystem either as a new player, new bureau or existing bureau, they have 63 products you can go out and sell to your client base., which is a powerful thing to show. And again, I mean, look, I'm not going to get into Venture versus ISOL versus UKG versus whomever. I always like to say, you know, we all suck in our own special way. I won't sugarcoat it, but, uh, you know, one of the things that you've got to do when you're a bureau and you're going to market is you've got to have the ability to sell and meet your customers at their point of need. And so they certainly have checked that box, and I know that's a challenge for some of their competitors. They also have a tool called Plexity. Now this one I thought was really cool. It's a client complexity scoring system that matches the clients to the right team and the right software based on how complex their situation is. To me, that seems so obvious and simple. I remember meeting with a bureau once early in my career and they said, we have vanilla, chocolate, and rocky road clients. And we make sure that our CS team has, you know, only a handful of rocky road with a handful of chocolate and then, you know, X number of vanilla mixed in there. So they only have a certain amount of complex clients, a certain amount of vanilla, et cetera. But that's an interesting approach to both of those in the respect of I want certain CS teammates to only handle the most complicated. They get no vanilla. And then I get somebody that maybe gets all the vanilla. Again, half dozen one way, six the other maybe. But I think it's an interesting philosophy when it comes to how are you going to settle who handles what on the CS team? That retention focus was something I was very interested in hearing more about. It's easy to get excited in the pace of acquisitions.— when you see what they've done to try to safeguard against the attrition, because that's always your biggest concern when you're acquiring at this scale, is can you keep the clients from falling out the backside? Now, obviously, most of these things we did not get into. The one piece of deal structure we did not talk a whole lot about were the retention-based payments. But obviously, you know, that's always a component of these deals is I've got to keep the customers after I acquire them in order for you to get paid your entire amount. So I'm certain that there's something there. However, they don't want to pay you pay you for 50% of your book. They want to pay you for 100% of your book. And you want to get paid for 100% of your book. It's interesting looking at their technology and the AI layer. I want to spend a couple minutes here because it was part that's relevant whether you think about selling or not. It was just some interesting intel from being on site. They have 75 active internal AI projects right now. One of the examples they gave me was something called CBA, Client Behavioral Analysis. This was a tool, a sentiment analysis tool that they built internally that listened across all their customer phone calls and tickets and then predicted client losses. And they used this going into last Jan 1, and it flagged 100 clients that it predicted would churn. And of those 100 that it predicted would churn, 80 of them actually churned. 80 of the 100 it predicted would churn actually did. And so that to me is incredible. If you've ever lost a client and thought to yourself, I saw that coming but didn't act fast enough, and we all have, right? It happens all the time. That's a problem they're trying to solve at scale with AI, which I think interesting. You know, we've got sentiment analysis in Zoho Desk, which is the ticketing system we use, and it's hit or miss. I mean, I don't know that it has a feature that can do that for me that says, hey, at the customer level, it doesn't inside of the ticket. I've not seen inside of it where it can tell me at the customer level, hey, this customer overall score is, you know, 72 and puts them in a high-risk category. But that would be very valuable. One of the things I thought was interesting, they talked about their internal training a So their sales training, as an example, they've converted entirely to avatars instead of humans. So it used to take them— they showed a couple of videos side by side of a woman on their HR team and an AI avatar. And they said, look, if, if Susie over here records this video and something goes wrong or we need to update something, we need to tell her to fix her hair the same way and put on the same outfit and come back in and record it next week. And all in all, those videos were taking us 45 hours to produce. Now with the AI avatar, we're talking about a 4.5-hour front-to-back production time for something that used to take us 45 hours. And when they need to update it, it's automatic. They can do it at a computer instead of asking Susie to come back in and, you know, oh goodness, she cut her hair in the week since we recorded the last one. Like, you know, they get rid of all that. No reshooting, no coordinating schedules, no making sure someone shows up in the same outfit as last time. And they do the same thing with their HR compliance videos for clients. They're starting to create those mostly via AI-generated avatars. You know, a couple other things to just sort of tickle my knowledge of what I know about, hey, they've acquired all these products like WorkLogic, Namely, Prism, who's what in this stack, right? And they showed me the stack. They have everything like you'd expect at maybe an ADP where they have an ADP Run type product. And then they showed Paychex next to that. And then they showed what's their product that's competitive to that product. What they've done is they've actually merged WorkLogic and Namely as one of their products, which I thought was really cool. WorkLogic is a good product. Shout out to those guys. And they also have a global product called Listo that just kind of sits on top of a bunch of localized tax filing platforms. And it's one unified platform. Platform that manages compliance across multiple countries. That was interesting. Another tidbit, random, but I thought was interesting is they don't have their salespeople do demos. They have dedicated sales engineers who handle that. I'm going to assume that in today's environment, I'm going to assume positive intent because I've worked in an environment with sales engineers before and it was awful. These guys just got on the phone and browbeat people with features and no matter what you did to prepare them, they were going to fill an hour with a demo no matter what. And the demo was going to be as much of a harbor cruise as it was going to be about the clients' pains, and it just got really into the weeds really quick. I do understand the value of sales engineers when they're trained properly and they understand how to actually sell, because to me, that job is still a sales job. It's not just simply demoing, but they use sales engineers that learn and sell across the entire product suite, the 65 products. Oh, and the really interesting thing is they've stood up a direct primary care and level-funded health program in 286 markets. That direct primary care thing was really, really interesting to me. And if you're not familiar with direct primary care model, definitely check it out. I mean, it might be something interesting just for you and your family. So here's my real take after spending a day with them. I got out there, it was a really interesting time because they were opening their new corporate headquarters the day after I was there. So I'm in a tour with all these people of the new building. I just am in the back of this group of folks who are from one of their latest acquisitions, and everybody's just kind of meeting each other for the first time. And who are you? And what are you doing here? Who's with venture? Who's with the new acquired company? Who's a partner? And people are asking me, who am I? And what am I doing in there? I was like, I guess I'm a podcaster. I don't even know. But I did this tour, checked out their amazing new HQ building. It was gorgeous. It was all the things you'd expect from a big company and what they're building. I was impressed overall with just the amount of time and energy they sort of gave to me in terms of, hey, we want you to understand so that you can educate others on how our acquisition process works. I obviously went in with a good bit of skepticism, wasn't really sure what they wanted from me. I've been in this world long enough to know that like, hey, there's, there's going to be a disconnect between a slide deck and operations on the ground. And I suspect there is here as there is everywhere. But I also know that there's, there's nowhere that these projects go perfect. I mean, I've sat there while we've acquired one of the largest bank payroll books of business in the Southeast. I've been a part of that deal. I've been a part of selling off pieces of of my own business. And, you know, I think it was just an overall interesting visit. Now, I haven't talked publicly about this yet, but we sold our payroll book of business last year. We went from being a payroll bureau to primarily a PEO and ASO almost exclusively. And, you know, I can walk through that process firsthand if any of you have any interest in hearing more about that, what it feels like, what you give up, what you gain, what I do differently next time. Let me know, leave a comment if you're interested in hearing more about that. I'll do a whole episode on it. On it. And look, if you're thinking about selling, here's the only thing I'll say on that front. Your number, your timing, your buyer is completely up to you. Don't let anyone guilt you into selling to someone or not selling to someone. Everybody has their ethics until it becomes in their moral compass, until it becomes about what's the best case for you, your clients, your family, your business, and only you can make that decision. Vision. It's your business. It's your life's work or 5 years or 20 years or 50 years and your future going forward. So nobody else should have a big vote on that. Nobody else should be able to guilt you and nobody should be able to press on you to take less money out of guilt. So what I will say also, just in addition to this, a lot of you, we've put out content before about creating content. None of this happens if I don't just pick up the mic and create the episode. I made some content about what I saw happening in the industry. Then the CEO of a company that I admire calls me and reaches out on Thursday night, invites me to his headquarters, quarters, you know, put yourself out there, shots on goal like we talked about with Chris. Like, continue to make sure that you're, you're expanding your surface for opportunity. And one of the easiest ways to do that is through content. Opportunities follow content. That's not a cliché. It just keeps happening. And so if you're interested in selling your payroll bureau or PEO and would like an introduction to them or others in the industry, I know M&A teams from Multiple just having gone through this process. I'm happy to make the connection. Again, if you want to hear a full episode on what our process looked like when we sold off our book of business, make sure you leave a comment. And if you haven't listened to that original Venture episode, make sure you do go back. I'll link it in the show notes. As always, thank you for listening. And I will, as always, say please abide by the gentleman's agreement and the lady's understanding. Well, Matt, what is the gentleman's agreement and the lady's understanding, you ask? Well, that's a great question. It's I just took 30 minutes out of my day, not to mention all the prep work, not to mention the, uh, 7-hour round-trip drive when charging the car, and then half-day on-site adventure to create this content for you, to educate you. Please, all you got to do is hit that subscribe button, that like button, and follow along on the journey. Thanks and have a blessed day.