Xero buys Australian payroll software vendor

$A1.5 million purchase of Paycycle will boost Xero across the Tasman

Xero has signed an agreement to acquire Australian online payroll company Paycycle for $A1.5 million.

In a statement on the NZX announcing the buy today, Xero notes: "The acquisition of Paycycle will accelerate Xero’s growth in the Australian market and enhances Xero’s online accounting offering for small businesses and their advisors.

"Acquiring Paycycle also provides Xero with a specialist payroll development team at a time when it remains difficult to secure skilled software personnel."

Paycycle was founded in 2009 and has 750 customers, the statement notes.

The purchase price of A$1.5 million comprises A$500,000 in cash and A$1 million worth of Xero shares. The shares will be vested over three years.

The statement continues: "Paycycle is one of a number of payroll providers, which integrate with the Xero software and half of Paycycle’s customers already use Xero.

In the statement, Xero CEO Rod Drury says: “Feedback from our Australian partners and customers is that we need to provide a fully integrated Payroll within Xero to win Australia. "We’ve been working with Paycycle for some time and know they will fit in well with our team. Our partners have been impressed with what they have delivered to date.”

Paycycle will continue to be sold as a standalone product until early 2012 when integration with the Xero platform will be complete.

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