New Zealand’s Xero to snap up Israeli fintech startup Melio for up to $3 billion
Based in Tel Aviv, Melio is the developer of a platform that seeks to make paying and getting paid electronically less of a burden to small and medium-sized businesses
Sharon Wrobel is a tech reporter for The Times of Israel
Israeli fintech startup Melio, the developer of a payments platform geared toward small and medium-sized US businesses, has agreed to be acquired by New Zealand cloud-based accounting software giant Xero Ltd. in a deal worth up to $2.5 billion.
Under the terms of the acquisition, Xero will pay Melio an upfront $2.5 billion in a cash and equity deal. An additional $500 million will be paid if certain milestones are met over a period of three years.
The multibillion dollar deal comes as the tech industry, one of the main growth engines of Israel’s economy, has been facing continuous headwinds in raising financing and attracting investment over the past two years, due first to the contentious planned judicial overhaul at the start of 2023, then the outbreak of war with the Hamas terror group in October of the same year, and most recently the 12-day conflict with Iran.
Founded in 2018 by entrepreneurs Matan Bar, Ilan Atias and Tomer Barel, Melio launched its platform in 2019, tapping into a massive B2B (business-to-business) payment industry in the US that still often involves payments to suppliers via checks and paper invoices, long payment cycles and cumbersome processes. Headquartered in New York, the startup employs about 600 workers, of whom 400, including its senior management, are based at its offices and R&D center in Tel Aviv.
“Joining Xero is an incredible opportunity for the Melio team to further our mission to reinvent the way businesses pay each other,” said Melio co-founder and CEO Bar.
While consumers have started getting used to payment apps to transfer money between friends or to service suppliers, small businesses have lagged. Melio says its platform is built on the belief that “paying and getting paid shouldn’t be a burden for small businesses.”
The platform is tailored to help businesses transfer payments electronically more quickly and easily, while providing them with data insights and control over their cash flow. It is used by 80,000 customers to process more than $30 billion in payments.
Xero CEO Sukhinder Singh Cassidy said the acquisition aligns with the company’s plans to expand in the US market.
“Adding Melio’s world-class team, technology platform, and innovative solutions to Xero enables a step change in our North America scale and the potential to help millions of US SMBs and their accountants better manage their cash flow and accounting on one platform,” Cassidy said. “We will continue to invest in Melio’s payments product and leverage Xero’s go-to-market expertise to accelerate growth in Melio and Xero in the US.”
Melio was last valued at $2 billion when it raised $150 million in October from investors, including NYSE-listed fintech firm Fiserv, Inc., Shopify Ventures and Capital One Ventures. Israeli and US venture capital firms Accer Ventures, Bessemer Venture Partners, General Catalyst and Thrive Capital also joined the investment round. In a previous funding round in 2021, the startup raised fresh capital at a company valuation of $4 billion.
The acquisition deal, which is subject to regulatory approvals, is expected to close within six months. Upon completion, Melio CEO Bar will be responsible for the combined US business of Xero and Melio.
The Times of Israel Community.