New Zealand accounting software giant Xero agreed to buy New York payments provider Melio for $2.5 billion, the companies said on Wednesday, accelerating the Kiwi firm’s push in the U.S. market with one of the country’s biggest outbound deals.
The deal fills a gap in Xero’s offer by adding payments to its accounting software while enabling both parties to scale up. Australia-listed, New Zealand-headquartered Xero dominates its home markets but has been trying to grow in the U.S. where it says it makes about 7 per cent of sales.
The deal “enables a step change in our North America scale and the potential to help millions of US (small-to-medium businesses) and their accountants better manage their cash flow and accounting on one platform”, said Xero CEO Sukhinder Singh Cassidy in a statement.
Xero forecast the buyout would double its 2025 financial sales by 2028.
Melio co-founder and CEO Matan Bar said he was “excited by our shared purpose to scale in the US and combine Xero’s accounting capabilities with Melio’s accounts payable and receivable solutions”.
Shares of Xero were suspended from trading on Wednesday as the A$30 billion ($19.5 billion) market capitalisation company asked institutional investors for A$1.85 billion to help pay for the purchase, but analysts gave a cautious endorsement of the deal.
“There is much to like in terms of bulking up US exposure with a leading, fast-growing payments player and longer term the proposed deal makes sense,” said RBC Capital Markets analyst Garry Sherriff in a client note.
“It will take time to process the intricacies of the deal and the pathway forward.”
E&P analyst Paul Mason said the buyout price “looks pretty full for the stand-alone business but works if you think the company can pull off strategic synergies around greater distribution”.
($1 = 1.5387 Australian dollars)
