Exclusive: Deel, a $12 billion HR startup, is contemplating an acquisition of competitor Papaya Global

• Insider obtained a letter sent from Deel’s chairman and CFO, Philippe Bouaziz.
• In the letter, Bouaziz says Deel “may contemplate an acquisition offer” of Papaya Global.
• Papaya’s CEO has been in an unusual public spat with one of the company’s largest investors.

According to a letter obtained by Insider from Deel’s chairman and CFO, Philippe Bouaziz, the board of Deel, a San Francisco-based HR software startup last valued at $12 billion, is interested in acquiring its competitor Papaya Global.

“The Deel leadership team and I have been closely following Papaya Global for quite some time now with great interest,” Bouaziz wrote to Papaya’s board of directors. “We are excited to get to know the company better in the coming months as we may consider an acquisition offer at some point.”

Deel’s spokeswoman declined to comment. In a statement, a spokesperson for Papaya Global stated that the company is not for sale.

Papaya Global is an Israeli payments processing startup that raised $3.7 billion in a round led by Insight Partners and Tiger Global in 2021. Eynat Guez, the company’s CEO, has had an unusual public spat with one of the company’s investors, Dovi Frances, the founding partner of the venture capital firm Group 11.

Guez threatened to sue Francis for defamation in July, months after he criticized her decision to withdraw company funds from Israeli bank accounts to protest the country’s judicial reform.

Francis responded this week by threatening to sell his entire stake in Papaya Global, 2.8% of the company, for $444 million, a nearly 90% discount to the company’s last funding round. Francis stated that the offer would expire on September 4th. According to a spokesperson for Papaya Global, Francis’ initial offer is “now moot.”

Bouaziz writes to the Papaya Global board that Deel would like to acquire Group 11’s position “and could consider buying other interested investors up to 10% of the company’s overall issued and outstanding shares” for $520 million.

He also mentioned the possibility of a full takeover of Papaya Global, which would require the board’s approval.

“While we are not directly privy to the company’s financials, we are very aware of the company’s overall situation and we believe that there is room for strong partnership between the companies, particularly with Papaya Global utilizing our unique and comprehensive in-house HR global Infrastructure,” Bouaziz wrote.

Deel now employs over 3,000 people and claims to be the fastest-growing software-as-a-service startup in history, having raised more than $650 million. Deel’s software enables businesses to manage payroll, employee onboarding, and other tasks. Andreessen Horowitz, Emerson Collective, Alexis Ohanian, Elad Gil, Y Combinator, and Coatue Management are among Deel’s investors. Nike, Shopify, Rebook, and Goldman Sachs are among the company’s clients.

Reported on the company’s use of independent contractors earlier this year. Following that, Adam Schiff and other US lawmakers wrote to acting US Labor Secretary Julie Su, requesting an investigation.