Xero buys South African firm Syft for US$70m – analyst sees it as a ‘departure’

Barely 18 months after a restructure that saw it write off $40 million on its last big acquisition, loan-against-receivables start-up Waddle, Xero has pulled out its chequebook again – and this time, analysts and investors are more impressed.

Xero has agreed to buy Syft, a South African maker of reporting software, for nearly US$70m ($115m). The deal involves US$30m in cash and US$10m in stock up front, with the balance in earnouts and restricted shares.

Syft (no relation to the Christchurch-based Syft Technologies) says it has cloud-based software which is used by accountants and small businesses in 80 countries. Around 70 Syft staff, mostly based in Johannesburg, will join Xero with the deal.

The Wellington-based, ASX-listed Xero offering no metrics, or any details beyond its statement to the market that the deal would have “minimal impact” on its FY2025 financials. But investors and analysts reacted positively.

Xero’s ASX-listed shares were up 1.43% to A$146.46 in midday trading for an A$22.5 billion market cap. The stock is up 23.93% for the year.

“Syft is a well-established and highly rated app – 4.8 out of five stars on the app stores of Xero and Intuit – that provides powerful capabilities, including financial forecasting,” Craigs’ Stephen Ridgewell told the Herald.

“This looks to us like a smart bolt-on acquisition,” Ridgewell added.

“Interestingly, Xero has decided it is better to buy than to build in this case – a departure from the previous ethos at the company to largely DIY, and a change in approach to R&D that had been signalled at its investor day in February.”

Xero said it would continue to sell Syft’s product standalone, but also add its financial forecasting capabilities to its own higher-priced monthly plans over time.

“That should support Xero’s medium strategy to drive Arpu [average revenue per user] growth by up-selling existing subscribers from lower value to higher value plans,” Ridgewell said.

Harbour Asset Management’s Shane Solly said Syft’s focus on analytics gelled well with Xero’s desire to push into AI.

“It’s a good bolt-on acquisition. Syft is a ‘built’ business ready to grow.”

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.