New Zealand based Xero Acquires Israeli Fintech Melio for $2.5 Billion to Expand U.S. Presence

New Zealand-based accounting software giant Xero has announced the acquisition of Israeli fintech startup Melio in a landmark deal valued at $2.5 billion, marking one of the largest acquisitions of an Israeli company in 2025. The move is designed to accelerate Xero's expansion into the competitive U.S. small business payments market.

Under the terms of the agreement, most of the acquisition will be settled in cash, while approximately $360 million will be paid in Xero shares to Melio’s existing shareholders. In addition, Melio’s employees are eligible for an extra $500 million over the next three years, largely based on performance targets and continued employment.

Acquisition to Boost Xero’s U.S. Market Position

Founded in 2006, Xero provides cloud-based accounting software tailored for small businesses and freelancers, offering features like invoicing, payroll processing, and financial reporting. Listed on the Australian Stock Exchange (ASX), Xero is New Zealand’s most valuable company, with a market capitalization of A$30 billion (US$19 billion).

The acquisition of Melio marks a bold step for Xero to strengthen its presence in the U.S. payments sector, where it aims to challenge incumbents with a seamless, integrated platform for small business payments.

Melio: From Israeli Startup to Fintech Powerhouse

Founded in 2018 by Matan Bar (CEO), Ilan Atias (CTO), and Ziv Paz, Melio developed a system that enables small businesses to pay suppliers digitally, sync payments with accounting software, and offer deferred payment options while ensuring suppliers receive funds promptly.

Melio has raised $660 million to date and employs approximately 600 people. As of March 2025, the company reported an annual revenue run rate of $187 million, meaning Xero is acquiring it at a 13.4x revenue multiple.

Deal Valuation Exceeds Previous Offers

The $2.5 billion price tag represents a significant premium over Melio’s last funding round in October 2024, which gave the company a $2 billion pre-money valuation. However, it still falls short of Melio’s peak valuation of $4 billion during the 2021 tech boom.

Melio was previously in advanced talks with Bill Holdings—operator of Bill.com—for a $1.95 billion acquisition deal in 2023. That deal fell through after it was publicly revealed by Bloomberg, causing Bill’s stock to drop and prompting a strategic retreat.

Shift from Direct Marketing to Strategic Partnerships

Melio originally focused on direct sales to small businesses but later pivoted to strategic integrations with large partners. Notably, it formed a partnership with Intuit, integrating Melio’s payments functionality into QuickBooks, a direct competitor to Xero.

With the acquisition, Xero not only gains a robust payment platform but also access to Melio’s existing network of business partnerships, positioning it to better compete with major U.S. players, such as Bill.com and Intuit.

Financing and Future Outlook

Xero plans to finance the acquisition primarily through debt, indicating strong confidence in the long-term value Melio can bring. The company aims to leverage Melio’s infrastructure and U.S. market presence to drive further revenue growth and expand its customer base.

The deal is expected to close pending regulatory approvals and standard closing conditions.