New Zealand-based accounting software giant Xero has announced its agreement to acquire New York-based payments platform Melio for $2.5 billion, marking one of the largest outbound deals by a Kiwi company. The acquisition will significantly strengthen Xero’s presence in the U.S. market, both companies confirmed on Wednesday.
Moreover, the acquisition addresses a critical gap in Xero’s product suite by integrating payments capabilities into its accounting software. As a result, both companies will be able to scale their operations more effectively, enhancing their value proposition in a competitive market. While Xero dominates its home markets in Australia and New Zealand, it has been actively seeking to expand in the U.S. market, where it currently generates only about 7% of its total 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.”
As part of the acquisition process, Xero’s shares were temporarily suspended from trading on Wednesday. The A$30 billion ($19.5 billion) market cap company simultaneously launched an A$1.85 billion capital raise from institutional investors to help finance the deal.
While this move supports the strategic acquisition, it also prompted cautious responses from analysts, reflecting both the opportunity and the risks involved. While the deal marks a bold strategic move, analysts offered a cautious endorsement, highlighting both the growth potential and associated risks of the transaction.
“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.”
