Xero’s total write-down in the value of its recent acquisition of Waddle, shocked some - not least Commonwealth Bank - but a buyer could still be found.
If accounting giant Xero and start-up Waddle were movie stars, their two-and-a-half year marriage would be normal by Hollywood standards. But breaking up after less than three years andIn making this very choice, new Xero CEO Sukhinder Singh Cassidy has flicked the switch on formally incinerating $31 million of cash at a retrospective rate of at least $30,000 a day.
As well as the $31 million up front, that deal also included an earn out of up to $49 million if Waddle delivered on its promise under Xero’s ownership.At the time of the deal no one reported Waddle’s revenues because no one cared – it was the era of cheap money and big FOMO valuations., indicating a shift away from Waddle’s lending activities and towards leveraging the tech platform to connect lenders with small business borrowers.
Back in 2021, CBA signed a deal to integrate Waddle and just three weeks ago its group executive Mike Vacy-Lyle finally announced that project’s completion with much fanfare. Whilst Meta will probably find a buyer for Kustomer, it will take a buzz cut on the valuation. Zuckerberg’s massive wealth redistribution activity has burned hundreds of millions of dollars in shareholder funds within a 12-month period.Xero, too, will have the same price problem if it decides to sell Waddle rather than shut it down. Thus, it was a smart more to take a full write-down now with a potential “surprise” gain on sale in the future.
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