Xero snaps up Planday in ecosystem absorption
In its largest acquisition to date, Xero bought European workforce management platform Planday. Xero’s Gary Turner and Planday’s Christian Brøndum reveal the details of the union.
On 4 March Xero sealed its biggest-ever purchase, paying €155.7m (£134.6m), to acquire Danish ecosystem developer Planday.
Planday offers staffing, collaborative scheduling and HR management tools, including workforce admin needs such as payroll and absence management. Planday currently serves Scandinavia, Germany, France and the UK.
According to Xero UK co-founder and managing director Gary Turner, Planday operates in an an area where Xero customers need help. By joining forces, Xero can add value to Planday and boost its people-focused capabilities in one move.
“We saw we could enable Planday to scale internationally more quickly than they could have otherwise done,” Turner told AccountingWEB. “So there’s a very mutual opportunity to take Planday international.”
Planday CEO Christian Brøndum said his board was ready to listen when made the initial approach: “We had a number of years of fast growth and we were riding the wave of that business. Had it not been Xero, we would have declined any other company. Together we can do a lot better than we can do alone.”
Driven by Covid-19?
Planday’s main market is hospitality, which was significantly hit by the pandemic. However, both Xero and Planday denied that the coronavirus had anything to do with their union.
While the hospitality sectory went into lockdown, new opportunities opened up elsewhere, Brøndum said. “Our governments had really good packages which have helped them stablilise - we’ve seen healthcare go up tremendously.”
The deal was driven more by the potential for the two organisations to connect workers virtually to the workplace. While the Planday CEO had nothing good to say about Covid-19, demand for such functions will have definitely increased during the past year of remote working.
As the European market leader for workforce management apps, particularly in Scandinavia and Germany, Planday brings new opportunities to break Xero into new territories, Brøndum added.
For the moment, however, Xero has no immediate plans to take its core accounting product to Europe, Turner said. “But obviously we’ll be watching and learning.”
According to Brøndum, Planday will add new functionality to Xero’s platform. Top of the list is payroll – “all the things you need to calculate and track payroll in a very efficient manner”.
Planday can surface historical data and current figures to produce revenue and payroll forecasts and display them in a KPI dashboard, he said.
Though relatively small. Planday invested significantly in building a regulatory rule compliance engine and multi-language capabilities, which will be very useful to its parent company as it expands into new markets.
Turner wouldn’t comment on where Xero would generate the revenue to justify the investment, but mentioned that Xero has an earnings call coming up in May where it should be in a position to talk more about the economic outputs over the next coming years.
“We think Planday will make a 3% contribution to our revenue in FY22,” he added.
Xero acquisition plans
Xero has a track record of making acquisitions within its own ecosystem, starting with Max Solutions (Workflow Max) in 2012 and more recently Hubdoc and Instafile (now Xero Tax) in 2018.
“If history is anything to go by, then where we see a great opportunity, [we] will acquire ecosystem partners,” Turner said.
Turner wouldn’t be drawn on any plans for Xero’s next move, emphasising that focusing on customers would be its priority, regardless of industry and specialism.
After a couple of other recent deals in the cloud software market, Turner did not see Xero’s latest acquisition as a signal for the start of an ecosystem consolidation wave. “We have thus far acquired four products out of 900,” he said.
“If anything, we think the ecosystem will continue to grow. I think the next race will be about broadening the deployment of all technologies. In the next few years, small businesses will elect to digitalise their own processes, so this will result in more apps coming to market, not fewer.”
For Turner, small businesses are still at an early stage in their technological development, with spreadsheets and notebooks still outnumbering commercial software solutions.
“So in many respects, there is still a huge amount of market opportunity,” he said.