The Xero Ltd (ASX: XRO) share price is up around 2% after revealing an acquisition.
Xero is one of the world’s largest providers of accounting software.
Xero buys Syft
The company announced to the ASX it’s buying Syft Analytics, which is a global reporting, insights and analytics platform for accountants, bookkeepers and small businesses.
This business is headquartered in Johannesburg, South Africa. Accountants and small businesses in more than 80 countries use Syft to review, analyse and forecast financial outcomes.
Syft has over 70 employees, the majority of which are based in South Africa, who will switch to Xero as part of the acquisition. Syft is an existing “top” Xero app partner. Xero said it plans that Syft will continue to be available as a standalone offering after the deal.
The total price of the acquisition and related employee incentive payments will be up to US$70 million, including an upfront payment of US$40 million (with approximately US$10 million of Xero shares), with the rest paid over three years, assuming the requirements are met.
Completion of the transaction is expected to happen in the third quarter of Xero’s FY25, and is subject to normal closing conditions, including necessary approvals
This deal is expected to have minimal impact on Xero’s financial metrics in FY25, according to the ASX tech share.
Management commentary
The Xero CEO Sukhinder Singh Cassidy said:
Xero has always focused on reimagining how accounting software can empower small businesses by providing insights to help them and their advisors run their business better.
Syft accelerates this further by offering deeper insights to help both small businesses and accounting and bookkeeping partners to make informed decisions.
Today’s announcement supports our strategy to create winning customer solutions by strengthening our accounting offering – one of the three most critical small business jobs.
Final thoughts on the Xero share price
The ASX tech share is one of the most exciting companies on the ASX, in my opinion.
Hopefully this acquisition is more successful than the Waddle acquisition a few years ago which it took a sizeable writedown on.
It makes sense to want to offer subscribers the best service possible. It’s interesting that Xero felt it necessary to own this business rather than just having it as an app partner.
I’m not sure if it’s a buy right now because its valuation has jumped 30% this year so far. However, profitable growth looks likely in the coming years, so this could go some way to justifying the current Xero share price (and more).
For now, there are other ASX growth shares I’d rather buy.
