Xero to acquire invoice lending platform Waddle

Xero today announces the acquisition of Waddle, a cloud based lending platform that helps small businesses access capital through invoice financing.

The acquisition aligns with Xero’s strategy to grow the small business platform and to address critical small business financial needs. Waddle’s best in class cloud lending platform, combined with small businesses’ invoice data, will enable the delivery of tailored invoice financing solutions.

Founded in Australia 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 and automating many of the manual processes typically involved in invoice financing.

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

Post the acquisition of Waddle, Xero will continue to explore how to facilitate small business access to capital, beyond invoice financing. The acquisition positions Xero to partner with lenders globally, to better serve small businesses’ working capital and other financial needs.

With an upfront cash payment of AUD 31 million and subsequent earnout payments based on product development and revenue milestones, of up to AUD 49 million, the total potential consideration for the purchase of 100 of Waddle is AUD 80 million. Any earnout payments are expected to be settled 50 in ordinary shares in Xero and 50 in cash. Completion of the transaction is expected before the end of calendar year 2020 and is subject to satisfaction of closing conditions. Transaction, integration and operating costs are anticipated to have minimal impact on Xero’s FY21 EBITDA.

Led by co-founders Simon Creighton and Nathan Andrews, Waddle’s team is headquartered in Sydney and currently serves customers in Australia and the UK. The business, which has been a Xero ecosystem partner since 2016, will continue to offer services to customers and partners, including other accounting software providers.

Xero CEO Steve Vamos commented: “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.”