Another Xero acquisition?

Cash-rich Xero is on the verge of announcing another acquisition at its Xerocon conference in Melbourne today or its annual meeting next Thursday  - at least according to the accounting industry rumour mill.

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Consultant and blogger Ben Kepes has picked Xero will either buy a practice management company, or Vend - a maker of online retail software - or a practice management software company.

Vend, which recently announced a partnership with PayPal for in-store payments via a smartphone, claims 11,000 customers worldwide and shares at least one investor (Sam Morgan) with Xero. Like Xero, it's expanding fast, but not making any money yet.

Is it about to be bought?

"It's flattering, but no," Vend CEO Vaughan Roswell told NBR. 

He did add that he will be at Xerocon today, showing casing Vend's cloud-based point-of-sale software to Xero partners - which could be where the rumour began.

Kepes (who has consulted to both Xero and rival MYOB, among others) backed off that one, is sticking by his story that Xero will buy a company in the practice management space (that is a maker of software for running a professional practice, like a law firm or medical practice).

Xero boss Rod Drury didn't immediately respond to a phone call from NBR. He did send a message indicating that as Xero was a public company, he would not comment on any acquistions that were pending, or not.

He did add that Xero has already bought a practice manament company in February - Max Solutions, for $6 million ($2 million cash and $4 million in shares). 

But Kepes maintains that is not enough. 

Max Solutions' Workfloxmax software handles online job, time and invoice management.

Kepes says Xero still needs to flesh out its offering in this area - more so since Christchurch-based Acclipse was bought by CCH (part of the multi-billion Dutch multi-national financial and practice management software company Wolters Kluwer).

"The failed relationship between Acclipse and Xero showed that acquisition or building is a better strategy to deliver upon this core requirement rather than loose integrations," Kepes told NBR.

"The ADP announcement out of the US [a major partnership between Xero and a US payroll services provider] speaks and to the need to tie in further touch points in an accountant's daily work." 

Dury did send an intriguing email to Kepes on the Acclipse-CCH deal. It read:

On the Acclipse deal if you were us you’d see it as a good sign if a competitor decides to be acquired rather than go it alone. Means you’ve hit max value. So that’s a good sign what we are doing Is working. Congrats to Mike though [Acclipse CEO and founder Mike Chisholm]. Not many people successfully exit businesses and he has done it multiple times.

Xero shares [NZX:XRO] closed at $5.40 yesterday (giving it a market cap of $560 million), having eased back from their recent all-time high of $5.70