Accounting software company Xero (ASX: XRO) is continuing its rise up the ladder as one the world’s most used business management platforms with the acquisition of European workforce management platform Planday and its 350,000 employee users.
Planday, which has been a Xero ecosystem partner since 2019, enables businesses to analyse staffing needs and payroll expenses alongside key business performance metrics to project labour requirements. This data can then be overlayed against historic or forecast business performance to offer labour cost projections which are often an employer’s largest expense, with these insights being cloud-based and accessible through Planday’s platform or related apps.
“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,” said Xero CEO, Steve Vamos.
“Planday also addresses the growing need for flexibility and rising compliance demands within the workplace.”
Making the acquisition more attractive to Xero is Planday’s customer geography where its customers are primarily located in Norway, Sweden, the UK, Germany, France and Denmark, where Planday is headquartered.
Upon completion of the acquisition, Xero will leverage its international presence to expand Planday into new markets to support Xero’s long-term growth plans while increasing its suite of services.
“We are beyond excited for this next step in Planday’s journey,” said Planday CEO, Christian Brøndum.
“Our mission is to make our customers’ day work, and make life easier for both employers and employees. This mission fits perfectly with Xero’s passion for small businesses, for people, for growth and for communities.”
The acquisition will be funded by an upfront payment of €155.7 million with 45% payable in XRO shares and 55% in cash. Additional earnout payments worth €27.8m will also be payable subject to product development and revenue milestones for total consideration of €183.5m.
For Xero’s Half-Year ending 30 September 2020, the Company reported a 21% pcp increase to $409.8m and an 86% increase in EBITDA to $120.8m.
Xero forecasts the acquisition to contribute approximately three percentage points of additional operating revenue growth for Xero in FY22 with modest negative impact for EBITDA once acquisition expenses are applied to their FY22 financials.
As a New Zealand-based company Xero is expected to report their FY21 results in May for the Full Year ending 31 March 2021.
Alfred Chan is an Analyst at Emerald Financial, specialising in ASX-listed small cap companies.
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