New Zealand's Xero acquires Melio for up to $3 billion, marking one of Israel’s largest tech exits

New Zealand-based fintech giant Xero has agreed to acquire Israeli startup Melio in a deal valued at up to $3 billion, including earnouts, the companies announced on Wednesday. The acquisition, first revealed by Calcalist, is structured as a mix of cash and equity and will give Xero full control of Melio’s payments infrastructure and client network in the United States, its most strategic growth market.

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Melio, founded in 2018 and based in New York and Tel Aviv, provides accounts payable and receivable solutions to over 80,000 U.S. small businesses. With more than $30 billion in payments processed and $187 million in annualized revenue, Melio has emerged as a key player in digitizing how American businesses manage bills, vendors, and cash flow.

For Xero, a publicly traded company on the Australian Securities Exchange with global ambitions, the deal represents a defining push into the U.S. market. “We’re acquiring Melio, a leading US B2B payments platform that strongly aligns with our 3x3 strategy and US growth ambitions,” said Xero CEO Sukhinder Singh Cassidy. “Adding Melio's world-class team, technology platform, and innovative A/P solutions enables a step change in our North America scale.”

The upfront payment totals $2.5 billion, with an additional $500 million in performance-based and time-based payouts over three years for Melio employees. The transaction, one of Israel’s largest tech exits, is expected to close within six months, subject to customary regulatory approvals, including U.S. antitrust clearance, and shareholder consent. Xero has already secured enough shareholder support from Melio to move forward with the merger.

In October 2024, Melio raised a $150 million Series E at a valuation of approximately $2 billion, a notable drop from its previous round, which valued the company at nearly double that amount.

Melio is led by CEO and co-founder Matan Bar, CTO and co-founder Ilan Atias, and President Tomer Barel. The company employs around 600 people, with approximately 400 based in its Israel offices.

Melio’s co-founder and CEO Matan Bar, who previously led product at PayPal and played a central role in developing Venmo, will lead the combined U.S. business under Xero. “Joining Xero is an incredible opportunity for the Melio team to further our mission to reinvent the way businesses pay each other,” Bar said in a statement. “We’re excited by our shared purpose to scale in the US and combine Xero’s accounting capabilities with Melio’s payments solutions.”

Melio has grown not only through direct sales but also by quietly powering payment infrastructure behind major brands. Its syndication model, essentially white-labeling Melio’s software to banks and SaaS companies, has attracted clients like Fiserv, Capital One, and Shopify. Through Fiserv alone, Melio’s technology reaches approximately 3,500 U.S. financial institutions that collectively serve 18 million small businesses.

This embedded technology strategy was a key attraction for Xero, which intends to integrate Melio's payments engine into its core accounting platform while preserving and expanding these syndication partnerships. Xero executives noted that the acquisition will triple their North American revenue on day one and help diversify the company’s business model beyond software subscriptions, introducing a meaningful transactional revenue stream.

The deal also arrives at a time when small and medium businesses are increasingly demanding integrated platforms that unify accounting and payments. Roughly 78% of U.S. SMBs rate such integration as a top priority, according to Xero. By addressing this demand, Xero aims to deepen its relationships with accountants, bookkeepers, and business owners, a customer base traditionally fragmented across various platforms.