• Planday set to expand into new markets where Xero operates
• Xero to integrate Tickstar’s technologies with its own
• Tickstar’s existing customers will continue to be serviced

Xero (ASX:XRO) announced that it had completed the acquisition of two companies Planday and Tickstar on 1 April 2021. Both acquisitions were announced earlier in March. Xero is a cloud-based accounting software platform that caters specifically to small businesses. The platform is distributed on the Software as a Service (SaaS) business model where businesses pay a subscription fee based on how many companies they need to be managed. The company employs over 3000 employees and has over 2 million subscribers.

One of Xero’s strategic priorities is to grow its small business platform, and the purchase of Planday is just another step in achieving this strategy. Xero plans to use the new technology to help its existing customers by expanding Planday’s operations into other markets where Xero operates upon acquisition. As a point of context, Planday is a Danish-based company whose product is a workforce management platform with more than 350,000 employee users across Europe and the United Kingdom. Planday’s platform works to simplify employee scheduling and allows business to better forecast and manage their labour costs.

It is hoped that when combined with Xero’s own accounting solutions, the company will be able to provide important insights into small business operations, such as real-time views of staffing needs and payroll costs, alongside the ability to display key business performance metrics. This would help business owners to match trading conditions with staffing levels to manage labour costs better. The acquisition of Planday consists of an upfront payment of €155.7 million and a €27.8 million earn-out payment based on product development and revenue targets. Financing of the upfront fee comprised of 45 per cent shares in Xero and 55 per cent cash. For the earn-out the ratio it was 50/50.

Tickstar is an e-invoicing infrastructure business that allows its clients access to a global cloud-based e-invoicing network. They are based in Stockholm, Sweden but service several markets around the world. Xero plans to leverage Tickstar’s technology to support its own e-invoice functionality. Xero has also committed to continue offering service to Tickstar’s existing customers under its Galaxy Gateway brand as well as its consulting services.

The purchase of Tickstar consists of an upfront payment of SEK60 million and an earn-out component of up to SEK90 million, which will be dependent on Tickstar meeting product development and performance targets. Like the Planday acquisition, the transaction was funded with a mix of cash and shares in Xero, 50/50 in this case for both the upfront payment and the earn-out.

The acquisition of Tickstar satisfies another of Xero’s strategic goals of driving customers toward cloud-based technologies. Ultimately, the company plans to build on itself and hopefully scale up to a global presence, and these latest acquisitions are just another step toward that goal. No matter how good the algorithm, if the training data is of poor quality then the program will be next to useless.