Why the Xero (ASX:XRO) share price is on watch today

The Xero Limited (ASX: XRO) share price is one to watch after the Aussie tech group unveiled its latest strategic acquisition.

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The Xero Limited (ASX: XRO) share price is one to watch in early trade after the Aussie accounting platform’s latest acquisition announcement.

Why is the Xero share price on watch?

Prior to this morning’s market open, Xero made an ASX announcement regarding its latest strategic acquisition – Planday.

Planday is a workforce management platform founded in 2004 and is focused on real-time business and employee collaboration software. The company’s cloud-based scheduling platform has over 350,000 employee users across Europe and the United Kingdom.

Xero is acquiring Planday and its technology that already integrates with the company’s accounting platform. Xero said Planday will “expand its presence into other markets where Xero operates” following the acquisition.

The Xero share price will be one to watch this morning following the update. Xero is set to pay 155.7 million euros (A$241.4 million) with total potential consideration of 183.5 million euros (A$284.6 million).

Completion of the transaction is expected to occur in the first quarter of Xero’s financial year ending 31 March 2022. Xero is anticipating a 3 percentage point increase in operating revenue growth from the purchase.

The Xero share price has been rocketing higher in recent years thanks to strong user and earnings growth.

Xero CEO Steve Vamos said the acquisition aligns with Xero’s purpose of streamlining operations for small businesses. “Planday also addresses the growing need for flexibility and rising compliance demands within the workplace”, he added.

Foolish takeaway

The pre-market acquisition announcement makes the Xero share price one to watch in early trade.

Xero shares are down 19.8% since the start of the year but remain up 54.3% on a 12-month basis. The Aussie tech company has been acquisitive in recent years including the August 2020 purchase of Waddle for A$80 million.

The S&P/ASX 200 Index (ASX: XJO) is tipped to open lower this morning based on the latest SPI futures.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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