Xero buys UK firm for $10m, MYOB takes local lead

"MYOB is experiencing significant growth in subscribers, including migrations from our non-paying subscriber base, as people move onto our higher value cloud-based service," MYOB boss Tim Reed says.

Xero has bought Instafile for £5.25 million ($10m) in a deal designed to boost its presence in the UK market.

The cloud accounting software company already has a strong presence in Britain. In its half-year result announced last week, Xero said its UK subscriber base had grown 40 per cent to 355,000 as revenue grew 45 per cent.

Instafile makes a cloud-based accounts preparation and tax filing solution that connects UK accountants, bookkeepers and small businesses to the UK's main tax-gathering agency, HMRC.

The Instafile purchase is Xero's first acquisition since it raised US$300m via a convertible notes issue in October to fund M&A activity.

Xero revealed the Instafile purchase at its latest Xerocon event, but had some of the wind taken out of its sales by MYOB's rival investor day announcement that it has become the fastest growing cloud-accounting software company in Australasia.

Drawing on ASX filings, MYOB chief executive Tim Reed says his company's online subscribers across Australia and New Zealand grew 60% to 550,000 - giving it the top spot for new subscribers.

Xero recently reported that its Xero's Australian subscriber base grew 27 per cent to 657,000 in the first half, compared to the first half of 2017, with revenue increasing 33 per cent.

In New Zealand, Xero saw 20 per cent subscriber growth to 324,000 and revenue growth of 22 per cent.

An MYOB investor presentation shows the company's increasing online subscriber growth, now ahead of "Competitor 1" (Xero), Competitor 2 (Intuit) and Competitor 3 (Reckon).

With 981,000 subscribers across Australia and New Zealand (and 1.58m worldwide), Xero can still claim the most cloud subscribers overall, but as the fastest-growing contender, MYOB is now closing the gap

Reed says MYOB is on track to pass 1m online subscribers in 2020.