Xero set to acquire Waddle

Xero has announced the acquisition of Waddle, a cloud based lending platform that enables small businesses to access capital through invoice financing.

Its cloud lending platform, combined with small businesses’ invoice data, will also enable the delivery of tailored invoice financing solutions. 

According to Xero, the move aligns with its strategy to grow the small business platform and address critical small business financial needs. It will also enable it to partner with lenders globally. 

Founded in 2014, Waddle’s lending platform service allows a range of banks and fintechs to “more easily” lend to small businesses by leveraging their accounting data, while automating the manual processes typically involved in invoice financing.

It has existing agreements with banks and lenders both in Australia and the UK. Alongside its core lending platform, it also operates a small direct lending portfolio used primarily for product development purposes.

Following the acquisition, Xero will continue to explore how to facilitate small business access to capital beyond invoice financing.

The transaction includes an upfront cash payment of AU$31m (£17m) and subsequent earnout payments based on product development and revenue milestones. The total potential consideration for the purchase is AU$80m (£44m). 

Any earnout payments are expected to be settled 50 in ordinary shares in Xero and 50 in cash. The transaction is expected to be completed before the end of the year, and the group anticipates that it will have a “minimal impact” on its FY21 EBITDA. 

Xero CEO Steve Vamos said: “The acquisition of Waddle is an important step in our strategy to help small businesses better manage cash flow and gain access to working capital.

“Waddle’s lending platform has the potential to enable a wide range of banks, fintechs and other lenders to better support small business financial needs. We’re excited about the benefits Waddle can bring to many of our customers and banking partners.”

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