Xero Limited (ASX: XRO) today announced it has entered into a binding agreement to acquire 100% of Melio Limited and its associated entities (collectively Melio). Melio is a leading SMB bill pay platform that seamlessly integrates Accounting and Payments, offering US SMBs and their accountants and bookkeepers easy-to-use accounts payable (A/P) workflows and a wide choice of payment methods, helping them to have more visibility and control over their cashflow. Acquiring Melio delivers a step change in Xero’s US value proposition and scale, accelerating its 3×3 strategy and global aspirations.
This acquisition solves a critical customer need in the US, uniting Accounting and Payments in one platform for customers. It’s a powerful strategic fit, aligning with Xero’s 3×3 strategy and it brings Melio’s world-class team and platform to Xero.
The acquisition is expected to be funded through a mix of cash and equity. The upfront consideration will be US$2.5 billion (A$3.9 billion) in cash and equity consideration. Additional contingent consideration, deferrals and rollovers is payable to Melio employees of up to US$0.5 billion payable over three years. The majority is linked to delivering against certain pre-agreed outperformance targets, and the remainder subject to the passage of time, annual business objectives and continued employment.
Xero CEO Sukhinder Singh Cassidy said: “We’re thrilled to announce we’re acquiring Melio, a leading US B2B payments platform that strongly aligns with our 3×3 strategy and US growth ambitions. Adding Melio’s world-class team, technology platform, and innovative A/P solutions to Xero enables a step change in our North America scale and the potential to help millions of US SMBs and their accountants better manage their cash flow and accounting on one platform. Xero and Melio are highly complementary — together they complete the key jobs to be done for US SMBs, extend reach across customer segments, provide both direct and syndicated offerings, and deliver multiple revenue drivers.”
Melio Co-founder and CEO Matan Bar said: “Joining Xero is an incredible opportunity for the Melio team to further our mission to reinvent the way businesses pay each other. Having worked closely with the Xero team, we’re excited by our shared purpose to scale in the US and combine Xero’s accounting capabilities with Melio’s accounts payable and receivable solutions to create comprehensive product offerings for our collective, valued customer base.”
COMPELLING STRATEGIC RATIONALE
1. Solves a critical US customer need in a large and growing TAM
– Accounting and Payments are the critical needs for US SMBs — with ~78% placing high importance on having these software offerings integrated
– The US SMB Payments TAM represents a US$29 billion opportunity, which is growing and supported by digitisation of A/P whitespace for business-to-business payments and increasing demand for software solutions that help customers save time and manage cash flow
2. Powerful strategic fit
– Payments is critical to Xero’s 3×3 strategy — Melio enables Xero to accelerate this strategy. It allows SMBs and accountants and bookkeepers in the US to complete the key Jobs to be Done (JTBD) seamlessly in one platform, enabling access to more fulsome ARPU economics
3. World-class team & platform
– Melio’s founders have built a leading platform that enables customer flexibility in how they pay vendors and provides purpose-built dashboards and tools for accountant and bookkeeper advisors
– The product is valued by customers, as reflected in: its customer satisfaction score (NPS 45)
– Melio’s founders and leadership team have deep Payments knowledge and technology experience and expertise, and will remain key leaders of the combined business
– Melio has a leading syndication offering. This white-label/embedded technology service provides vertical SaaS platforms and financial institutions (including Fiserv, Capital One and Shopify) access to Melio’s services
– The syndication model provides the opportunity for Xero to offer both Accounting and Payments longer term, in a single platform, to millions of US SMBs by extending partnerships with providers such as Fiserv which powers ~3,500 financial institutions that serve ~18 million SMBs
4. Powerful value creation opportunity
– Melio’s US presence provides a step change in Xero’s US value proposition and scale, driving a ~3x increase in Xero’s North American revenue and ARPU on day-one
– Expands Xero’s customer ARPU, improves Lifetime Value (LTV) and allows Xero to unlock a flywheel that better enables investment for scale in the US market
– Xero and Melio are a powerful combination of complementary solutions which:
-
- Completes the key Payments JTBD for the combined customer base of A/P and A/R, alongside core Accounting JTBD offered by Xero
- Extends and improves customer segment reach further beyond small businesses (1-20 employees) to self-employed and medium-sized (employing 20+) businesses
- Provides new channels to reach customers, many of whom are pre-accounting, including through a differentiated payments syndication offering across bank and vertical SaaS partners with the potential to expand that offering over time
- Diversifies Xero’s business into a subscription + transactions revenue model
The transaction is targeted to complete within 6 months of signing subject to conventional conditions precedent to closing, including satisfaction of various customary regulatory conditions and approvals for a business of this nature as described below. On completion, Matan Bar, Melio’s CEO and Founder will be responsible for the combined US business (reporting to the Xero CEO) that will bring together Xero and Melio’s teams across Accounting, Payments and Melio’s syndication network.
Xero CEO Sukhinder Singh Cassidy added: “We’re excited to welcome Melio’s world-class team to Xero and look forward to working together to deliver on our shared goals once the transaction completes. We will continue to invest in Melio’s Payments product and leverage Xero’s go-to-market expertise to accelerate growth in Melio and Xero in the US. In parallel, we will embed Melio’s features into Xero’s core platform, creating a market-leading Accounting and Payments offering that maximises value for our US customers.”
MELIO BACKGROUND
Melio is a leading platform that enables easy to use A/P workflows and a wide choice of payment methods for US SMBs. Founded in 2018, Melio has expanded significantly to serve 80,000 customers, processing over US$30 billion in payments in FY25 (31 March year end) to generate US$153 million in revenue and March 2025 annualised revenue of US$187 million. Melio helps customers save time and manage cashflow when managing bills and A/P. Key benefits include:
- Easy to use A/P workflows: Seamless processes, and flexible integrations reduce the time and cost of managing payments
- Multiple ways to pay & get paid faster: Payors & payees can each choose their preferred payment method, helping to manage cash flow
- Appeals to multiple SMB & AB segments: Ease of use attracts SMBs of all sizes, and their advisors, with purpose-built dashboards & tools
Additional information
The transaction will be effected by way of a merger of Melio Limited and a newly incorporated wholly owned subsidiary of Xero Limited. Completion is subject to conventional conditions precedent to closing including (i) satisfaction of various customary regulatory conditions and approvals for a business of this nature including change of control consents for relevant state Money Transmitter Licences and US anti-trust approval (Hart-Scott-Rodino or HSR); (ii) no “Material Adverse Change” in the Melio business and; (iii) valid shareholder vote by Melio shareholders approving the merger. As at the date of this announcement Xero has received covenants to vote in favour of the merger from more than the required number of Melio shareholders. Xero has agreed to pay a break fee of US$37.5 million in the event that the acquisition does not close solely due to failure to secure HSR approval.
