Coalesce Capital Backs Outsourced Services Provider DecisionHR in $450 Million Deal

By Laura Kreutzer

Coalesce Capital is backing DecisionHR in a $450 million bet on the growing use of professional employer organizations, or PEOs, for outsourced services, which the fledgling private-equity firm knows about firsthand.

“The first thing I did when I started Coalesce was hire a PEO, because every minute spent on payroll checks, insurance benefits or labor laws was one less spent building the business,” said Stephanie Geveda, a Warburg Pincus veteran who founded Coalesce in 2022 following 12 years with the larger New York buyout firm. “My firsthand experience made it clear: For a small business, engaging a PEO isn’t just helpful, it’s absolutely essential.”

The DecisionHR transaction is valued at $450 million, people familiar with the matter said. The latest deal brings the total that Coalesce has invested or agreed to invest in the past 12 months to nearly $700 million across four companies and total deployments since inception to $1 billion across six businesses, the people added.

DecisionHR offers outsourced services to small and medium-size organizations that employ what are often referred to as “gray collar” workers. These people often engage in tasks that require a mix of physical labor and specialized training or skills, such as nurses, firefighters and hospitality workers. The company’s services include payroll processing, workers’ compensation and benefits administration.

Coalesce evaluated about 10 different PEOs before striking a deal with DecisionHR, which stood out from the crowd for several reasons, according to Geveda. First, the company had an attractive size and scale with some 1,700 customers with a total of about 47,000 workers, according to Geveda.

DecisionHR also demonstrated an ability to successfully integrate a merger after acquiring Modern Business Associates in 2022, another factor that helped it stand out, she said. Additionally, Geveda said the company caters to a portion of the workforce that many other PEOs overlook.

“We built the firm to back companies like DecisionHR,” she said. “We tapped into an essential business service in a growing market with a rising adoption on the back of a killer value proposition, but more importantly we found a well-run, profitable company with a team and sellers looking for a partner.”

Coalesce is investing in the company out of its debut fund, which closed last year with $900 million. Earlier this year, the firm bought a majority stake in DAS Health Ventures, which provides information technology and business services for physicians groups across North America. Last year, Coalesce also backed Pearl Meyer & Partners, which advises companies and their directors on issues such as compensation, leadership development and corporate governance.

Since its founding, Coalesce’s team has expanded to around 25 professionals, including John Mulflur, who joined the firm as a managing director earlier this year. Mulflur had previously served as a managing director at London-based private-equity firm Permira, where he focused on services businesses. Coalesce Capital manages a total of around $1.6 billion in assets, including co-investment capital, people familiar with the firm said.