Xero Makes Bold US Expansion With Melio
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- NZ software leader Xero to acquire US payment firm Melio in transformative multibillion-dollar deal
- Acquisition funded through discounted share issue, cash reserves, stock swaps and modest additional borrowing
- Move expected to double Xero revenue by 2028 and strengthen foothold in competitive American market
Xero has struck its largest deal yet, agreeing to purchase United States payments platform operator Melio for US$2.5 billion (about NZ$4.1 billion) in cash and shares. The Kiwi software company – headquartered in Wellington but listed on the Australian Securities Exchange – hopes the move will finally accelerate its long-sought expansion across the world’s biggest small-business market.
Chief executive Sukhinder Singh Cassidy said the two firms offer a natural fit for small and medium enterprises that want to keep accounts and payments under one roof. "Xero and Melio are highly complementary - together they complete the key jobs to be done for US SMBs (small medium businesses), extend reach across customer segments, provide both direct and syndicated offerings, and deliver multiple revenue drivers." She added that the merger "enables a step change in our North America scale and the potential to help millions of U.S. (small-to-medium businesses) and their accountants better manage their cash flow and accounting on one platform,".
Under the agreement Xero will pay Melio’s shareholders US$2.5 billion upfront split between cash and new Xero stock, with a further US$500 million possible in earn-outs over three years. To fund the purchase the company is issuing 10.5 million new shares to institutional investors at A$176 apiece – a nine-per-cent discount to its last closing price – while existing shareholders are being invited to take up around A$200 million in additional equity. The balance will come from stock provided to Melio staff, cash reserves, and a modest draw-down of debt.
Melio was founded in 2018 and now employs more than 800 staff across New York and Tel Aviv, serving roughly 80,000 customers with accounts-payable and receivable tools. Its integration will plug the one obvious hole in Xero’s product line and give the New Zealand firm an immediate payments footprint in the United States, where it currently derives only seven per cent of revenue.
Analysts reacted positively but warned execution risk remains. RBC Capital Markets noted that "There is much to like in terms of bulking up U.S. exposure with a leading, fast-growing payments player and longer term the proposed deal makes sense," while others cautioned that "It will take time to process the intricacies of the deal and the pathway forward." Melio co-founder and chief executive Matan Bar said he was "excited by our shared purpose to scale in the U.S. and combine Xero's accounting capabilities with Melio's accounts payable and receivable solutions".
Xero expects the purchase to double its 2025 financial year revenue by 2028, making it the country’s largest outbound acquisition since 2011 and marking a decisive push into the competitive American fintech arena.