Gusto Acquires Guideline for $600M: What This Means for Customers and Industry Rivals | TechCrunch

Last month, Gusto, a payroll and HR software company, announced its plans to acquire Guideline, a startup that provides retirement solutions for small and medium businesses. The deal is estimated at around $600 million, though the exact figures can’t be confirmed yet.

Guideline was valued at $1.15 billion in 2021 during its $200 million funding round. Since its start in 2015, it has raised a total of $340 million. Even though Gusto is paying less than Guideline’s last valuation, early investors like Felicis and NEA are still likely to see a return.

Kevin Busque, a co-founder of Guideline, created the company to simplify 401(k) plans for businesses. Instead of charging a percentage of the funds, Guideline has a flat fee per employee. As of January, the company reported an annual recurring revenue of $140 million.

Gusto, valued at $9.3 billion, has been offering 401(k) plans in partnership with Guideline since 2015. However, Guideline is not only linked to Gusto; businesses can access its services through other payroll providers like ADP and Intuit.

According to sources, Gusto plans to sell accounts linked to Guideline’s rivals. This could provide additional profits for both companies’ shareholders. However, Gusto hasn’t shared specifics about the deal or its plans to divest these accounts.

Interestingly, a spokesperson for Guideline has disputed the $600 million figure without elaborating further. They also confirmed that Guideline’s customer relationships will remain intact post-acquisition.

Despite being profitable for over a year, Guideline’s reasons for selling are unclear. The competition is tough, with companies like Human Interest gaining ground. Human Interest, backed by SoftBank, posted a 70% growth last year and anticipates being profitable soon. The company is currently in talks to raise $200 million at a projected $3 billion valuation.

In today’s competitive landscape, Gusto’s acquisition of Guideline reflects a strategy to enhance its offerings in a growing market for employee benefits. With retirement planning becoming increasingly vital for businesses, this move might set the stage for more advancements in the sector.

For more insights into industry trends and retirement planning, visit CNBC.

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