New Zealand-based accounting platform Xero has reached a deal to acquire Calgary tax preparation software startup TaxCycle for a total of $75 million CAD.
TaxCycle, formally known as Trilogy Software, is an established Canadian tax solution that serves nearly 4,000 tax firms and over 16,000 individual accountants, bookkeepers, and tax preparers across the country with its desktop-based offering.
The announcement is the latest in a series of moves that Xero has made to expand its Canadian presence.
Through the acquisition, Xero hopes to leverage TaxCycle’s Calgary-based team, expertise, and customer base to support its growth in the Canadian market. The New Zealand-based firm referred to the deal as “an important step forward” in the company’s commitment to Canada, where it already has a footprint in Toronto and Vancouver.
Xero also described Calgary as “an important location for its Canadian growth plans,” noting that the acquisition immediately grows its presence in the city by three-fold.
TaxCycle was founded in 2010 by CEO Cameron Peters, who formerly served as Intuit Canada and United Kingdom CTO. The company has approximately 30 employees.
The announcement is the latest in a series of moves that Xero has made to expand its Canadian presence, beginning with its acquisition of Toronto-based document management startup Hubdoc in 2018 for $70 million USD, which saw Xero establish an office in Toronto that it later named as its North American tech hub.
Xero, which was founded in 2006, provides accounting software to small to medium-sized businesses and boasts over 3 million subscribers from around the world. While a spokesperson for the company indicated long-term plans to expand its presence in both Calgary and Canada broadly, they declined to comment on any future acquisition plans.
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“This announcement marks an important step in Xero’s commitment to extend and enhance our product offering for Canadian customers and partners by providing a product that meets Canada’s unique tax requirements,” said Xero CEO Steve Vamos.
The deal is expected to close by December 31. Following the acquisition, TaxCycle will continue to operate as a standalone brand led by Peters. Under Xero’s ownership, TaxCycle’s existing customers will continue to have access to the company’s desktop tax solution.
TaxCycle is set to receive $70 million CAD from the sale, including nearly $50 million in cash and over $20 million worth of Xero shares.
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As part of the acquisition, TaxCycle employees are set to be granted $5 million in restricted stock units that will vest between one and three years after the deal closes and remain subject to continuing employment.
Following its rollout of a new integration with Shopify last month, Xero has already launched an integration with TaxCycle’s platform.
Over the longer term, Xero also plans to leverage TaxCycle’s expertise and tax management capabilities “to enhance its localized cloud offering, over time,” as Xero looks to “extend [its] Canadian value proposition” to offer a better, more accurate and efficient user experience.
Feature image courtesy TaxCycle.