Xero Limited (ASX:XRO) has announced the acquisition of US-based Melio, a high-growth SMB payments platform, for upfront consideration of US$2.5bn in cash and scrip, with up to US$0.5bn in additional performance-linked payments over three years. The acquisition is designed to fast-track Xero’s growth in the US, aligning with its “3×3 strategy” (focused on three core services — Accounting, Payroll, and Payments — across three key markets: US, UK, and Australia). Melio enables seamless accounts payable workflows and offers a range of payment methods, targeting a growing US$29bn SMB payments market. Xero CEO Sukhinder Singh Cassidy described the deal as a “step change” in Xero’s value proposition in North America, with the potential to significantly increase revenue and average revenue per user (ARPU).
The acquisition will be funded through a mix of equity and debt: an A$1.85bn institutional placement, issuance of Xero shares to Melio shareholders, a US$0.4bn revolving credit facility, and US$0.6bn from Xero’s existing cash reserves. A share purchase plan (SPP) targeting an additional A$200m will be offered to eligible retail shareholders. Melio generated US$153m in FY25 revenue (to 31 March) and processed more than US$30bn in payments, with a 127% revenue CAGR since FY21. Xero expects the deal to triple its North American revenue and ARPU immediately and deliver combined revenue synergies of ~US$70m and cost synergies of ~US$20m by FY28.
Melio’s leadership team, including co-founder and CEO Matan Bar, will remain with the business, leading Xero’s US operations. The merger is expected to close within six months, pending regulatory approvals and Melio shareholder consent (already secured in principle). Xero has emphasised the complementary nature of the businesses and aims to integrate Melio’s payments technology directly into its accounting platform, ultimately offering a unified solution to millions of US SMBs. The company reaffirmed its FY26 guidance excluding the impact of the transaction and will provide updated forecasts post-completion.
