Xero to Acquire Melio for US$3.9B, Doubling U.S. Revenue and Accelerating Global Expansion

About Xero Limited

Xero Limited (ASX: XRO), a global small business accounting software provider headquartered in Wellington, New Zealand, announced on 25 June 2025 that it will acquire Melio Limited, a leading US-based SMB bill payments platform, for US$3.9 billion (approx. A$5.9 billion). Funded via a $1.85 billion fully underwritten equity raise, the acquisition integrates Melio’s payments infrastructure used by over 300,000 monthly active users into Xero’s platform. The deal is expected to accelerate Xero’s growth in North America and strengthen its global expansion strategy.

Strategic Transaction Reinforces North American Growth and Product Scale

The acquisition aligns directly with Xero’s “3×3 strategy,” which targets growth in three core services (accounting, payroll, and payments) across three global markets (ANZ, UK, and North America). By acquiring Melio, Xero addresses a long-standing gap in its US platform by offering a natively integrated accounts payable and payments solution, a key pain point for small business customers and accountants.

The transaction is structured as an all-share acquisition, with US$3.9 billion to be paid in Xero shares. The valuation reflects Melio’s revenue growth profile, gross profit trajectory, and product fit. Melio’s current leadership team will remain with the business and assume expanded leadership responsibilities within Xero’s global team.

The combined business is projected to double Xero’s US revenue by FY28. Management has also flagged anticipated synergies of NZ$100–120 million by FY30, consisting of cost efficiencies, platform leverage, and expanded customer lifetime value through cross-sell initiatives.

Melio will continue to operate under its own brand, and Xero intends to maintain existing partner integrations while gradually enhancing product alignment across both platforms. The transaction is expected to close in Q3 FY26, subject to customary regulatory approvals.

Capital Raising and Financial Positioning to Support Scaled Execution

To support the acquisition, Xero has announced a fully underwritten $1.85 billion capital raising. This will comprise a $950 million institutional placement and a 1-for-11.5 pro-rata accelerated non-renounceable entitlement offer to raise an additional $900 million.

The placement price is set at $118.50 per share, representing a 5.2% discount to the last close. The entitlement offer will be priced at the same level and is open to eligible shareholders in Australia and New Zealand. The institutional offer opens immediately, while the retail entitlement offer opens 1 July 2025. Xero expects to use the proceeds for acquisition funding, integration-related investments, and general corporate purposes, including product and sales expansion in North America

The company confirmed that it remains well-capitalised post-transaction and that its free cash flow profile remains intact. Melio is expected to remain cash flow negative in FY26, but transition to positive contribution in FY27 and beyond. Xero will consolidate Melio’s financials post-acquisition and provide further guidance during its H1 FY26 results announcement.

The transaction has been approved by Xero’s board and is unanimously supported by the company’s senior leadership. Existing shareholders will experience dilution but are expected to benefit from increased earnings scalability over the medium term. No changes to Xero’s executive leadership or board structure were announced in conjunction with the transaction.

Xero’s acquisition of Melio represents one of the largest offshore SaaS acquisitions by an Australian-listed company in recent years. The deal signals Xero’s intent to build platform scale in payments while expanding its footprint in the world’s largest SMB market.

The company estimates the North American addressable market for accounting-led payments and workflow automation exceeds US$15 billion, with low current penetration among digital-first tools. By unifying accounting and payments in a single ecosystem, Xero aims to drive higher ARPU, improved retention, and increased engagement across its partner network.

Xero noted that Melio’s go-to-market model will remain intact, including its partnerships with other accounting platforms such as QuickBooks. Xero intends to honour these relationships while gradually deepening native integration for its own user base.