Sage wants to buy MYOB

news Global software group Sage overnight confirmed it was currently considering attempting to acquire Australian financial software company MYOB, which is currently owned by local private equity house Archer Capital, following a $437 million buyout in early 2009.

“The Sage Group notes the press speculation regarding a potential acquisition of MYOB Pty Ltd,” Sage said in a statement to the London Stock Exchange, where it is listed. “Sage can confirm that it is currently considering a potential acquisition of MYOB. However, there is no certainty that it will proceed. The company will provide further information, if and when appropriate.”

The news follows constant speculation by the financial press over the past few weeks that MYOB, which remains one of Australia’s largest software houses, was on the market after two and half years being developed under Archer’s wings. It is common practice for private equity firms to acquire companies which they see as having rapid expansion or turnaround potential — and then to sell or list them on stock markets after several years of progress.

Yesterday the Financial Reviews’ Street Talk rumours column wrote that a number of other private equity firms could also be interested in buying the firm.

opinion/analysis
There would appear to be both good and bad aspects to a buyout by Sage of MYOB. With some 13,600 staff and six million customers located around the globe, Sage is a business exponentially larger than MYOB, and would be able to help the company take its business to the next stage.

The two companies both have a fairly good reputation for customer service and flexibility, particularly in the small business sector, and we anticipate the company cultures would be similar.

However, it also remains true that Sage already has an accounting and finance software suite, and there would need to be some deep thinking done around product integration. When software companies merge there is always some disruption involved. In addition, many will not be happy to see MYOB, one of Australia’s few large home-grown software companies, sold off to a multinational, which will doubtless eventually shutter the MYOB brand.

Regardless of this, Archer Capital stands to make a killing. With publications such as the AFR valuing MYOB at between $800 million and $1 billion, the private equity firm could double its money on the investment in only a couple of years. But then, private equity firms usually do.

Image credit: Vangelis Thomaidis, royalty free