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Business and financial management solutions provider Intuit Inc. (INTU - Snapshot Report) is set to acquire Prestwick Services, LLC, a provider of payroll based billing and payment solutions. Although the financial details of the deal were not available, the transaction is likely to close during the second quarter of fiscal 2014. Following the acquisition, Prestwick Services’ TRUPAY will be incorporated into Intuit's Employee Management Solutions Division, without any alteration to the present agent-client relationship.

With the acquisition of TRUPAY technology, Intuit will be able to build a platform that enables small businesses to simplify the calculation of workers compensation insurance premiums. Additionally, the integration of Prestwick Services will not only add value to Intuit’s existing portfolio but will also enhance the process efficiency of both the companies.

Moreover, it will make Intuit’s platform more efficient in handling payroll, inventory, sales and other needs of a small business by saving time and increasing accuracy of the work.

Prestwick's workers compensation payment platform, TRUPAY, is one of the leading payroll based billing and payment solutions offering pay-as-you-go facilities through existing agents. It is an established human capital management solution that increases productivity and enterprise responsiveness by streamlining business processes.

According to Gartner, payroll outsourcing is growing in both traditional and cloud–based platforms as more and more companies are looking at the payroll market as a key to reduce costs and enhance service levels to employees and managers. Gartner predicts that the HR BPO market will grow at a compound annual growth rate (CAGR) of 5.5% by 2017. We look at this prediction as a positive indicator as payroll BPO represents roughly one-half of this market.

We are positive about Intuit’s growing SMB (small & medium business) exposure and believe that the Demandforce acquisition will continue to provide support to the segment. However, competition from leading payroll solution provider Paychex Inc. (PAYX - Snapshot Report) in the SMB arena, seasonality of Intuit’s tax business and the ongoing uncertainty in the economy concern us.

Currently, Intuit has a Zacks Rank #3 (Hold). Investors can instead consider SanDisk Corp. (SNDK - Analyst Report) with a Zacks Rank #1 (Strong Buy) and Arrow Electronics, Inc. (ARW - Analyst Report) with a Zacks Rank #2 (Buy), which are better ranked investment options.


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