Xero expands small business offering with Planday acquisition

Under the deal, valued at €183.5 million, Xero will pay €155.7 million upfront and the remainder will be paid based on earnout payments based on product development and revenue milestones.

Xero has announced it will buy out Denmark-based workforce management platform Planday in a move to further grow its position in the small business market.

Planday is cloud-based platform that's been designed to provide businesses with a real-time view of staffing needs and payroll costs, alongside business performance metrics.

"The acquisition of Planday aligns with our purpose to make life better for people in small businesses and their advisors," Xero CEO Steve Vamos said.

"Planday's workforce management platform helps small businesses to respond to the rapidly changing nature of work. Planday also addresses the growing need for flexibility and rising compliance demands within the workplace."

The acquisition deal will come to a cost of €183.5 million, of which €155.7 million will be paid upfront, while a subsequent earnout payment of up to €27.8 million will be made based on product development and revenue milestones.

Approximately 45% of the upfront consideration will be paid out in Xero shares and the remainder will be settled in cash. Meanwhile, up to 50% of the earnout payment will be settled in Xero shares while the rest is paid in cash.  

Following the acquisition, which is expected to be completed in Q1, Xero said Planday will expand its presence into other markets where Xero operates. Planday currently operates in Denmark, Norway, Sweden, the UK, Germany, and France, and has over 350,000 employee users.

Xero expects the acquisition to contribute approximately three percentage points of additional operating revenue growth in FY22, adding it anticipates transaction, integration, and operations costs will have a "modest negative impact" on the company's FY22 earnings before interest, tax, depreciation, and amortisation.

Xero has been working on its long-term plans of becoming a small business platform since 2017.

"Our purpose now is to help small businesses create jobs, get capital into them, and to give them pathways to trade with other businesses all over the world," then-CEO Rod Drury said of the company's shift from an online accounting platform into a global small business platform.

"We're moving away from the software to actually being a business platform that accountants and bookkeepers can run their practices on to make small business customers more productive."

This plan was given a further boost in August when Xero announced the purchase of Australian cloud-based invoice lending platform Waddle for AU$80 million.

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