Xero makes largest-ever acquisition

Xero is making its largest-ever acquisition.

The Wellington-based, ASX-listed company will acquire Planday, a maker of workforce management software, for an upfront payment of € 155.7 million ($259m) and a possible earnout of up to € 27.8m if revenue targets are hit — for a total potential consideration of € 183.5m. Net cash was $177m, supplemented by undrawn credit of $150m.

Planday, which bills itself as “advanced employee scheduling software made simple”, is used to manage some 350,000 staff across the UK and Europe. Its customers on the continent include Burger King, Eurocar, Nespresso and Best Western.

It boasts: “Planday’s cloud-based technology offers significant flexibility and self-service functionality through a mobile app. Employers and employees can communicate easily, collaborate on scheduling, track time and attendance, manage payroll, vacation, absence, and other labourrelated compliance needs.”

The Planday purchase continues a recent Xero strategy to accelerate growth and diversify from its accounting software roots via acquisition.

In August last year, Xero bought Australian invoice-financing startup Waddle in a deal worth up to A$80m ($86m). Waddle lets a small business take a secured loan against its accounts receivables — helping to tide it over until an invoice is paid.

Xero said in an ASX filing that the acquisition, expected to close before June 30, will “contribute approximately three percentage points of additional operating revenue growth in FY2022. Transaction, integration and operating costs are anticipated to have “a modest negative impact” on Xero’s FY2022 operating earnings.

Around 45 per cent of the upfront payment will be payable in Xero shares and the balance in cash. Any earnout payment will be 50-50 cash and scrip.

Xero reported 2.5 million customers for the six months ending September 30. Net profit for the period was $34.5m (from the year-ago $33.2m) as revenue rose 21 per cent to $410m.

Xero shares were trading down 3 per cent at around A$115.5 yesterday evening, for a market cap of A$17.5b.

After topping A$100 for the first time in August last year, Xero shares spiked to an all-time high of A$157.99 in January before pulling back on a survey that found its small business customers’ revenue was down 6 per cent on 2020.