Tina Morrison for NZ News UK writes: Xero, the cloud-based accounting firm, paid the equivalent of $10 million in cash and shares for US online payroll company Monchilla to help drive its expansion in the world's largest economy.
Xero paid US$4.1 million in cash and issued 238,490 shares valued at $20 apiece to acquire Seattle-based Monchilla from founders Jack Couch and Nanjuan Shi, who will continue with the firm, the Wellington-based company said in a statement. Half of the shares are restricted from trading for two years, the company said.
The software developer wants a million customers, and is targeting growth in the US market where it sees the potential to take market share of an estimated 29 million small to medium sized business owners. The company last year raised $180 million in new capital to fund its US growth plans and is eyeing a US listing after it reaches annual revenues of US$100 million, expected in this financial year, and has tapped former Microsoft chief financial officer Chris Liddell as chairman.
"Over the last year, with Australia and United Kingdom markets performing well, we have been focussing on delivering the best business software for the US market," said Xero chief executive Rod Drury. "The cloud accounting market is just beginning in the US and our proven speed of delivery and the ability to quickly integrate complementary technologies into our platform positions us strongly to take a share of this large market as it develops over the coming years.”
Integrating Monchilla with Xero provides improved business-to-government connectivity and the opportunity to deliver electronic filing and payments of payroll taxes, with calculation support, across the US in 2015,the company said.
Xero said it will support Monchilla's current customers and transition them to Xero's platform over time. Shares in Xero rose 0.9 percent to $16.65, and have shed 49 percent so far this year.
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Xero acquisition of Monchilla accelerates payroll expansion
Xero acquisition of Monchilla accelerates payroll expansion in the U.S.
Xero Limited (XRO) announces that it has acquired Seattle-based online payroll company, Monchilla Inc. The company’s payroll expertise and technology will enable Xero to rapidly accelerate the extension of its payroll offering across the U.S.
“We were really impressed by the Monchilla team and how they have approached filing and payment of payroll taxes in the U.S. Combining this capability with the work our own team are doing will allow us to develop a world-class payroll experience for the U.S. over the next 12 months,” says Xero CEO Rod Drury.
Integrating Monchilla with Xero provides improved business-to-government connectivity, and the opportunity to deliver electronic filing and payments of payroll taxes, with calculation support, across the U.S. in 2015.
“We’re thrilled to join the Xero team and work together to deliver a world-class, online payroll solution for small businesses in the U.S. market” says Monchilla co-founder and CEO, Jack Couch.
Xero purchased Monchilla from founders, Jack Couch and Nanjuan Shi, whose continued involvement will complement Xero’s U.S. product development teams and support Xero’s payroll strategy to drive further growth. The total purchase price for Monchilla is comprised of US$4,127,688 in cash together with 238,490 Xero Limited ordinary shares to be issued to the founders at closing (50% of which are subject to trading restrictions and other terms as set out in more detail in the Notice of Allotment (NZX) and Appendix 3B (ASX) filed today).
Monchilla, as an early start-up, has solved the complexity of electronic payroll state filing and was in the initial stages of launching and building a customer base. With the acquisition, Xero will continue to support Monchilla’s current customers and will transition them over time to the Xero platform.
Drury says “Over the last year, with Australia and United Kingdom markets performing well, we have been focussing on delivering the best business software for the U.S. market. The cloud accounting market is just beginning in the U.S. and our proven speed of delivery and the ability to quickly integrate complementary technologies into our platform positions us strongly to take a share of this large market as it develops over the coming years.”
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Oliver Furniss from the Xero blog writes:
The family is growing – Monchilla joins Xero
We have some exciting news to share: Xero has acquired Monchilla to accelerate the rollout of payroll in the US. Monchilla is an online payroll provider that focuses on small business in the US.
Although this was a big decision for us, it wasn’t a difficult one to make. Before deciding to extend an offer to Monchilla, we’ve spent a lot of time looking at how we can accelerate bringing online payroll to all states in the US. And I can say without a doubt, Monchilla will enable us to accelerate our goals in the US but also add experience in building our global platform with best of breed government connectivity.
Integrating Monchilla’s advanced technology with Payroll in Xero will offer Xero’s small business customers the ability to calculate and electronically file and pay payroll taxes across the US. But that’s not the only reason we’re excited about adding them to the Xero family. Our companies actually have a lot in common and are aligned on making the lives of small business owners better and making payroll as stress-free as possible.
“It was an obvious choice for us to join Xero to bring our experience in the US to Xero. No other company is building a beautifully designed and full featured global integrated payroll and accounting system. This is something small businesses around the world, but particularly in the US are begging for.” said Jack Couch, co-founder of Monchilla. “We’re excited to be joining Xero and for what the future holds for small business.”
“We’re working to improve the financial lives of small businesses by bringing them the latest tools.” says Rod Drury, Xero CEO. “This acquisition will further support our customers and accelerate growth in the US.”
The Monchilla team will be joining Xero with Jack and Nanjuan, the Monchilla co-founders, taking up leadership positions within the payroll team. Existing Monchilla customers will be fully supported as we roll out payroll to more states in Xero. We’ll transition Monchilla customers to Xero over time.
US Payroll in Xero
We launched US Payroll in Xero to make it easier for small businesses to manage their payroll, file taxes, and pay their employees while reducing the hassles and costs associated with having separate payroll and accounting software solutions. Early in 2014 we made the decisions to pause the rollout to more states while we built a solid foundation on which to grow and scale our platform and improve the overall experience.
Monchilla is a natural complement to our technology and we’re all excited by the opportunity this brings for us to accelerate towards our vision of supporting payroll in all states with full electronic services. The acquisition of Monchilla comes on the heels of our recent releases of Federal e-file, e-pay and with W-2 forms and filing being released next week. It’s part of our ongoing commitment to deliver beautiful seamless payroll and accounting to the US.
By providing a more complete online payroll solution, even more small businesses will have the chance to experience the joy of online payroll and accounting working as one.
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