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Xero scoops up Hubdoc in $70 million acquisition

The acquisition is expected to fuel the next phase of Xero's global growth by accelerating the company's ability to automate the flow of data.

Cloud accounting firm cum small business platform Xero has announced acquiring data capture firm Hubdoc for $70 million in cash and equity.

Hubdoc, based out of Toronto, Canada, helps accountants, bookkeepers, and small businesses streamline admin such as financial document collection and data entry by automatically collecting bank statements, bills, and receipts.

The company has been a Xero "ecosystem partner" since 2014 and the acquisition boosts Xero's strategy to deliver "code-free accounting". Its product will be sold separately and the company will keep its current business model.

"The acquisition of Hubdoc enables us to take the next step in delivering a platform that seamlessly connects small businesses with their financial data and their accountants and bookkeepers," Xero CEO Steve Vamos said.

Xero will pay the acquisition price in two stages, initially with $60 million, comprising 35 percent in cash and 65 percent in Xero equity. Xero has arranged new debt funding for the cash component, it said.

The second stage will see $10 million in equity issued to Hubdoc's shareholders in 18 months.

The transaction is slated for completion by the end of August and Xero expects the purchase to reduce its earnings before interest, taxation, depreciation, and amortisation (EBITDA) in FY19 by around NZ$7 million.

For the 2018 financial year, Xero posted an after-tax loss of NZ$27.9 million. The result was much improved on FY2017, which saw the company report an after-tax loss of NZ$69.1 million.

The company reported EBITDA of NZ$26 million, a NZ$54.6 million improvement over FY17's NZ$28.6 million EBITDA loss.

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