Xero (ASX:XRO) will pay the acquisition price for Hubdoc in two stages — initially US$60 million consisting of 35% cash and 65% in Xero equity — and a second tranche of US$10 million in equity to be issued to Hubdoc’s shareholders in 18 months, subject to meeting agreed operational targets and conditions.
The company says the transaction and integration costs, together with continuing investment in Hubdoc’s growth, are expected to reduce its EBITDA in FY19 by approximately NZ$7 million.
Under the deal, expected to be completed this month, the Toronto-headquartered Hubdoc will continue to operate on a stand-alone basis within Xero, led by co-founders and co-chief executives, Jamie McDonald and Jamie Shulman.
Xero says that, over the longer-term, customers can expect to see a deeper integration between Hubdoc and the Xero platform, servicing customers globally – and it is fully committed to its open ecosystem strategy and Xero customers will continue to have access to the full range of more than 700 apps that connect with Xero.
Hubdoc has been a Xero ecosystem partner since 2014 and the company automatically collects bank statements, bills, and receipts from more than 700 financial institutions, utilities, telecom providers, and suppliers, delivering streamlined data capture and a seamless integration with accounting solutions such as Xero.
Xero says the data capture capability is a key element of its code-free accounting strategy, which enables small businesses and their advisors to focus on growing their businesses.
Xero chief executive Steve Vamos said the acquisition of Hubdoc enabled the company to take the next step in delivering a platform that “seamlessly connects small businesses with their financial data, and their accountants and bookkeepers” and accelerates the company’s 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”.
McDonald and Shulman said: "Over the past four years, Hubdoc has built an industry-changing product, a passionate following of customer advocates and a reputation for an authentic, human service. What is exciting about this transaction is the opportunity to deeply partner with Xero in its mission to rewire the global small business economy."