On August 25th, 2020, SMB Accounting SaaS heavyweight Xero announced the acquisition of Waddle for a reported A$80M (including long term incentives). Waddle is an Australian based invoice lending cloud platform. For most small businesses, access to capital is consistently the most critical issue in supporting their long term financial viability. Waddle enables this by connecting financial institutions to small and emerging businesses. Of course, every acquisition is about execution and not announcements, but fundamentally it is a positive step forward.
The acquisition supports the small business sector, which is, of course, core to the Xero customer base. It also helps support the future direction for accounting firms. Technology, like Xero, has dramatically evolved the role of the accountant. capioIT has followed the shift in the Accounting profession from Tax to an advisory role. This capability presented under the banner of Xero will help accelerate this; the time that automation provides clients can be used by accountants to support clients in their overall business requirements.
Xero has bought Waddle as both companies are maturing in their relative scale. Waddle is primarily Australian with limited UK presence. Having the ownership of Xero will help accelerate the Waddle presence in the UK in the first instance, where it already has some presence. New Zealand is, of course, the other immediate market to leverage for Xero alongside increasing penetration in Australia.
What Waddle will look like with Xero ownership is, of course, a fundamental issue. According to Xero, for the foreseeable future, there will be limited change. It is going to keep Waddle as an independent entity. Waddle has relationships with other accounting platforms such as Sage, so this is a sensible approach. It is a fine line with acquisitions, integrate or independence. Still, Waddle is the fifth acquisition for Xero, so it is getting the processes in place to optimise the value of the acquired company.
Finally, the blending of AccountingTech with FinTech and Small Business Tech is also worth consideration. It highlights that the role of the accountant is changing, that technology does not exist in isolation or narrow definitions. It also shows that the complexity of businesses large or small can not be eased by lumping applications as “Industry name here” tech. Instead, there has to be integration, cross-pollination and an open mind to solving customer issues and improving their business outcomes.
The Xero acquisition of Waddle is essential for both companies. It enables Xero users to have access to invoice capital, and to ensure that Xero is continuously evolving for its accountant and small business market focus. It also highlights the value of innovation in Australia, where FinTech, in particular, is strong. Finally, and assuming a positive integration, it works for customers who can gain access to capital that is increasingly difficult in an uncertain economic climate. That alone is enough to make it positive.