In a landmark move to strengthen its presence in the U.S. market, New Zealand-based accounting software leader Xero has announced plans to acquire U.S.-Israeli payments firm Melio for up to $3 billion. The acquisition represents the largest overseas deal by a New Zealand company in over a decade.
Xero will pay $2.5 billion through a mix of cash and equity, with an additional $500 million in performance-based payouts, deferrals, and employee stock rollovers over the next three years.
The acquisition is seen as a strategic leap forward for Xero (ASX: XRO), which currently derives only about 7% of its revenue from the U.S. market. By integrating Melio’s payment capabilities into its accounting platform, Xero aims to deliver a comprehensive financial solution to small and medium-sized businesses across North America.
“This deal 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,” said Xero CEO Sukhinder Singh Cassidy in an official statement.
Founded in 2018, Melio is headquartered in New York, with additional operations in Tel Aviv, and currently serves around 80,000 customers. The company provides accounts payable and receivable solutions designed for SMBs and has rapidly built a reputation as a top fintech player.
Melio CEO and co-founder Matan Bar expressed enthusiasm about the acquisition, saying, “We’re 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.”
According to LSEG, the acquisition is New Zealand’s largest outbound deal since 2011. Xero projects that the integration will double its FY25 sales by 2028, signaling long-term growth potential.
To help finance the acquisition, Xero suspended trading on Wednesday and launched a A$1.85 billion capital raise from institutional investors. The company, with a market cap of A$30 billion (~$19.5 billion), is betting big on consolidating its position in the U.S. fintech landscape.
The market response has been cautiously optimistic. RBC Capital Markets analyst Garry Sherriff noted, “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.” However, he added that the full implications of the transaction will take time to evaluate.
Paul Mason of E&P also weighed in, commenting that while the price tag “looks pretty full for the stand-alone business,” the valuation could prove justifiable if strategic synergies around distribution and platform integration are successfully realized.
