2nd Feb 2012. New Zealand listed cloud-based accounting software Xero (NZE:XRO) has taken full ownership of leading Auckland based software developer Max Solutions Holdings Limited to help provide a full suite of online tools to accountants, enabling them to operate without expensive in-house servers.
Xero already owned 15.9% and it has agreed to pay $2 million cash and $4 million of Xero shares for the remaining 84.1%. The shares will vest over three years.
Based in Auckland, Max Solutions was founded in 2007 by Gavin George and Chris Spence, with the aim of building a job management solution to be delivered across the internet. Gavin George and Chris Spence will become part of the Xero team and will bring with them all other Max Solutions staff.
In late September 2010 Xero invested $200,000 to take a 15.9% stake in Auckland based Max Solutions, the company behind the successful online job, time and invoice management solution WorkflowMax which is used by more than 1000 businesses in 35 countries.
The initial investment was to help Max Solutions fund the development of a New Zealand tax lodgement system. This now forms part of Xero’s Modern Practice offering – a suite of online solutions accountants can use to run their practice in the cloud without the need for expensive in-house servers.
Xero’s New Zealand Country Manager Leanne Graham says over 3300 accounting and bookkeeping firms worldwide now use Xero which proves the accountant channel strategy is working.
“Adding WorkflowMax to our portfolio of products will mean we can offer a more seamless experience for our accounting partners. Not only does it help us win the entire practice, it places us in a very strong position against incumbent providers.”
“Our team has worked alongside Gavin and Chris for four years and we continue to be impressed with their ability to innovate and deliver,” says Xero CEO Rod Drury. “They will take a leadership role at our new Auckland premises where we are creating a new development hub.
“We are incredibly excited about the enormous opportunities this affords both the WorkflowMax team and product set,” says Max Solutions co-founder Gavin George. “We always envisaged that WorkflowMax would be a truly global solution, and now with the funding, talent and energy that Xero brings we have a significant opportunity to achieve our goal.”
At the same time, Xero raised NZ$20m in a $2.75 a share placement to major shareholders and will offer new shares to other investors at the same price after electing to chase global revenue growth at the expense of profits. Shareholders including Trade Me founder Sam Morgan, Sam Knowles, MYOB co-founder Craig Winkler and the New Zealand investment vehicle of Paypal co-founder Peter Thiel.
Xero stock reached a record $3.06 early last month and fell 0.7 per cent to $2.92 today.
The capital top-up comes as the as-yet-to-be profitable Xero funds its operations out of its cash holding, which stood at $11.4m as of September 30, down from $16.9m at March 31. The company anticipates full year revenue to come in at $18.6 million, twice that of the previous year. Xero reported a net loss of $3.7m for the six months ending September 30, 2011. The company gets about 50 per cent of its sales overseas and said growth in offshore sales was one of the main drivers of its forecast jump in revenue this year.