Xero Expands US Footprint with $3.9 Billion Melio Acquisition
Technology company Xero, which is listed on the Australian Securities Exchange (ASX), on Wednesday announced that it will acquire the US payments processor Melio in a $3.9 billion deal that forms part of its US value proposition and global high-growth aspirations.
Melio services small-to-medium-sized business (SMB) clients and their advisors by integrating accounting and payments functions into one platform, with easy-to-use accounts payable workflows and a wide choice of payment methods.
Xero expects the acquisition to be a “powerful strategic fit” for its ‘3×3’ strategy, which focuses on improving core accounting, payroll and payments solutions within key markets across Australia, the UK and the US.
Xero hopes to complete the deal within six months. Melio’s co-founder and CEO Matan Bar will be responsible for the combined US business, reporting to Xero CEO Sukhinder Singh Cassidy.
Xero CEO Sukhinder Singh Cassidy said Melio’s business aligned with the company’s US growth ambitions.
“Bringing Melio’s world-class team, technology platform and innovative accounts payable solutions to Xero enables a step change in our North America scale and the potential to help millions of SMB clients and their accountants and bookkeepers to better manage cash flow and accounting on one platform,” Cassidy said.
“Xero and Melio are highly complementary businesses—together, we can complete the key jobs to be done for US SMBs, extend reach across customer segments, provide direct and syndicated offerings, and deliver multiple revenue drivers,” Cassidy added.
Transaction Details
Xero will fund the acquisition through a $1.85 billion institutional placement at a fixed offer price of $176 per share, a $554 million Xero scrip issued to existing Melio shareholders, a $615 million unsecured revolving credit facility and $923 million of existing cash.
The placement price represents a 9.4% discount to Xero’s last closing price of $194.21 and will see the issue of 10.5 million new shares (representing 6.8% of existing issued shares), with eligible shareholders also able to participate in a non-underwritten share purchase plan to raise a further $200 million.
Xero could pay Melio an additional $770 million based on certain performance targets and after a set time period.
The deal values Melio on a multiple of approximately 13.4x its March annualised revenue of $288m, which Ms Singh Cassidy said reflected the high-growth profile of a business that has delivered a revenue compound annual growth rate of 127% for the four years to 2025.
Seamless Integration
Melio is known for its seamless integration of accounting and payment workflows, offering robust accounts payable features and diverse payment method support. For Xero, this acquisition represents a decisive step toward solving a critical customer need: unifying accounting and payments on a single platform.
By embedding Melio’s capabilities, Xero aims to accelerate its North American expansion and position itself as a more compelling choice in a highly competitive software landscape.
The acquisition is expected to triple Xero’s North American revenue and average revenue per user (ARPU) immediately upon completion. Management also indicated the transaction could help more than double total revenue by FY28, even without factoring in additional revenue synergies.
