Xero to Purchase Melio in a $2.5 Billion Merger Deal
Xero, a leading cloud-based accounting software provider, has announced its intention to acquire Melio, a leading Small and Medium Business (SMB) bill pay platform, in a deal worth $2.5 billion (A$3.9 billion). The deal, which is expected to be completed within six months of signing, will bring together Xero and Melio's teams across Accounting, Payments, and Melio's syndication network.
The acquisition aims to address a major customer need in the US by uniting Accounting and Payments on a single platform for customers. Xero's CEO, Sukhinder Singh Cassidy, stated that the combined US business is expected to maximize value for Xero's US customers.
Melio is a platform that integrates Accounting and Payments, offering a seamless solution for SMBs. The syndication model provides Xero with the opportunity to offer Accounting and Payments on a longer-term basis to millions of US SMBs. Xero will embed Melio's features into its core platform, and will continue to invest in Melio's Payments product.
The deal will be funded through a mix of cash and equity. Contingent consideration, deferrals, and rollovers are payable to Melio employees of up to $0.5 billion, payable over three years. Xero will leverage its go-to-market expertise to accelerate growth in Melio and Xero in the US.
Xero has entered into a binding agreement to buy 100% of Melio Limited and its associated entities. The combined US business will report to the Xero CEO. Matan Bar, Melio's CEO and founder, will be responsible for the combined US business.
The deal benefits Xero by accelerating its 3×3 strategy and allowing SMBs, accountants, and bookkeepers in the US to complete key tasks seamlessly in one platform. Xero also aims to extend partnerships with providers such as Fiserv, which powers approximately 3,500 financial institutions that serve around 18 million SMBs.
However, no search results specify which company will buy the Xero Group and provide contracts with Fiserv. Various regulatory conditions and approvals are applicable to the deal, and the upfront consideration will be US$2.5 billion (A$3.9 billion) in cash and equity. The deal is subject to customary conditions precedent to closing.
The combined US business will bring together Xero and Melio's teams, working towards a common goal of providing a comprehensive solution for SMBs in the US. The deal is expected to be a significant step forward for both companies, offering a unified platform for Accounting and Payments to millions of SMBs in the US.
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