Shares of Xero Limited [ASX:XRO] has increased by 3.68% today, following Xero’s announcement revealing the acquisition of cloud bookkeeping solution, Hubdoc.
Xero’s share value is currently sitting at $44.38 — up 192.94% from its original listing price of $15.15 in 2014.
Free Report: Discover four red hot ASX profit plays for 2018. Read Now.
What does this new acquisition mean for Xero?
Founded in 2011, Hubdoc is a leading data capture solution that helps small businesses streamline administrative tasks such as financial document collection and data entry.
Hubdoc has been a Xero ecosystem partner since 2014, its data capture capability being key element of Xero’s code-free accounting strategy, which enables small business and their advisors to focus on growing their business.
Hubdoc will maintain its current business model, continuing to be sold separately, available to both Xero and non-Xero customers.
Xero will pay for the acquisition in two stages, initially US$60 million — consisting of 34% cash and 65% equity — followed by US$10 million in equity issued to Hubdoc’s shareholders in 18 months, subject to agreed operational targets and conditions.
The transaction is expected to take place in August 2018. Xero have warned investors that the transaction along with the continual investment in Hubdoc’s growth is expected to reduce Xero’s FY19 earnings by NZ$7 million.
What does the future hold for Xero?
The company has stated that it is committed to managing its cash flow without drawing any further debt.
Xero CEO Steve Vamos commented saying,
‘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. This acquisition accelerates our ability to streamline the collection and classification of the data small businesses and their advisors need in order to focus on driving better business outcomes.’
For Money Morning
PS: Xero’s share price has had incredible growth since listing on the ASX, increasing its value by almost 200%. Our Money Morning Editor, Sam Volkering, argues that the biggest potential gains can be found in the sector with the biggest potential risk — small-cap stocks. If you’re interested in learning more, check out his free report ‘Top Three Aussie Small-cap Stocks’. You can download this free report here.