Xero Ltd (ASX: XRO) shares are underperforming on Thursday.
In afternoon trade, the cloud accounting platform provider's shares are down 1.5% to $154.60.
This has been driven by broad weakness in the tech sector, which has offset the release of a positive announcement.
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What did Xero announce?
After the market close on Wednesday, Xero revealed that it has completed the game-changing acquisition of Melio.
It is a leading US-based small business bill pay platform that seamlessly enables customers to manage their cashflow by offering them and their advisors easy-to-use accounts payable (A/P) workflows and a wide choice of payment methods.
This is Xero's biggest acquisition to date and will cost it a cool US$2.5 billion, which has been funded through a combination of cash, debt, and the issuance of new Xero shares.
The cash component is a total of US$1.8 billion and was supported by the already complete A$1.85 billion institutional placement, A$129.5 million share purchase plan, and US$500 million cash on its balance sheet.
But the company believes this is money well spent. Commenting on the deal, Xero's CEO, Sukhinder Singh Cassidy, said:
We are delighted to welcome the Melio team to Xero. The combination of our world-class teams and technology will help customers to better manage their cash flow and streamline their operations on one platform. We are confident in our execution and eager to complete our integration work to deliver this compelling value proposition to our customers. This acquisition is a significant milestone in our journey, and we are excited about the opportunities it creates to accelerate our growth.
Melio's CEO, Matan Bar, spoke positively about linking up with Xero. Bar said:
Joining forces with Xero is a natural next step for Melio. We share a common vision of empowering small businesses to succeed. By integrating our platforms, we can create a seamless experience for businesses to manage their finances, from accounting to payments. We are thrilled to complete this acquisition and look forward to what we can achieve together for our customers.
The good news is that Melio has traded in line with Xero's expectations through the first half of 2026.
As a result, it continues to reiterate its aspirations related to the Melio transaction. These are that:
The combined business is expected to significantly accelerate US revenue growth and gives Xero the opportunity to more than double its FY25 group revenue in FY28 excluding anticipated revenue synergies. This outcome is expected to support our aspiration to deliver greater than Rule of 40 outcomes for the group in FY28.
