Fast-growing Inova Payroll has bought a Pennsylvania company that grows its client base by two-thirds and lifts its annual revenues above $6 million. Terms of the transaction were not disclosed.
To help fund its acquisition of Total Payroll Services and invest in equipment to keep growing, two-year-old Inova also has received $5 million in capital from a group that includes original investors Nashville Capital Network and Tennessee Angel Fund. The funding completes the company's B round and means it now has received more than $9 million in capital since being launched.
President and CEO Farsheed Ferdowsi said adding Lancaster, Pa.-based Total lets him market his team as a national player in a still-fragmented business. Inova now has 1,500 clients and handles the payroll of more than 60,000 employees from offices in Nashville, Chattanooga, Knoxville, Atlanta and Pennsylvania.
Ferdowsi, who in the spring of 2012 bought East Tennessee-based CPS, is a veteran of the payroll services sector. From a Franklin base, he built PayMaxx into a company that processed payroll for 150,000 people before selling it to CompuPay in 2005. His latest deal for Total got its start after Ferdowsi last year mailed out letters to licensees of the same payroll-processing software system he runs to ask about possible transactions. He received a handful of initial responses and ended up moving forward with talks to take on Total, whose founders Kathy and Ralph Bisonic will stay on in full-time roles until later this year to help with the transition. The Bisonics also have invested some of their sale proceeds back into Inova.
"They'll be my partners and advisors as we move forward," Ferdwosi (pictured) said. "This transaction is all about continuing to grow across the country. In three years, given our growth rate, we could hit the 100,000-employee mark, but we need to make sure our capacity to do that is robust."
Since buying CPS, Inova has posted an organic annual growth rate of more than 25 percent, Ferdowsi said, and has been signing up clients from New York to Arizona even though it has no physical presence there. Bringing on Total, he added, also comes with the expertise of handling Pennsylvania's more convoluted local tax requirements.