The Xero Limited (ASX: XRO) share price will be on watch this morning after it announced another bolt-on acquisition that seems like a smart move.
Xero buys Planday
The accounting technology business revealed that it’s buying Planday, which is a workforce management platform business that currently has over 350,000 employee users across Europe and UK to simplify employee scheduling, which allows businesses to forecast and manage their labour costs. Other benefits include saving time, dealing with increased compliance costs and supporting more flexible forms of work.
Planday was created in 2004 and is headquartered in Denmark. The main countries that it operates in includes Denmark, Norway, Sweden, the UK, Germany and France.
The acquisition price is an upfront payment of €155.7 million as well as a potential earnout payment of up to €27.8 million based on product development and revenue milestones. Around 45% of the upfront payment will be made in Xero shares, with the other 55% in cash.
What’s the thinking behind the acquisition?
Xero said that Planday is an open platform that integrates with Xero, other accounting solutions and third-party workforce-related apps, which can give a real-time view of staffing needs and payroll costs, alongside key business performance metrics.
The cloud accounting business said that when combined with an accounting solution like Xero, it could mean Planday is able to provide insights to a business or advisor that help them adjust staffing levels to match trading conditions and control labour costs, which are often a business’ largest expense.
Xero CEO Steve Vamos comments
Mr Vamos said: “The acquisition of Planday aligns with our purpose to make life better for people in small businesses and their advisors. 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.”
Summary thoughts
This seems like a smart move by Xero. The more that it can offer subscribers, the more attractive its software will be. It could lead to an increase in the subscription price for business. Xero may also be able to attract larger clients if it can integrate the software well into its existing package.
Xero has made a number of smaller, smart buys that improve the overall attractiveness of the company. With the Xero share price dropping in recent weeks, I think it could be worth considering if it continues to drop on market volatility.
