News just in that, despite UK accounting vendor Sage trying their hardest to purchase MYOB, another private equity firm has scooped the Australasian accounting vendor that has been on the market for a little while. Interestingly enough, the markets didn’t like Sage’s intentions and punished the share price resulting in the acquisition flipping over the 25% of market value figure beyond which shareholder approval is needed.
Now that Sage is out, and Bain Capital is in, the interesting thing here is something alluded to by Xero CEO Rod Drury this afternoon when he asked how Bain is looking to add value to MYOB. Given that private equity firms have a traditional three to five year divestiture model, one has to wonder how Bain intends to increase profitability sufficiently to command a premium down the line when the reported price they’re paying (in the vicinity of USD1.4B is already so high).
One possibility is that Bain has a multi acquisition strategy and is looking to buy some other vendors o tie together with MYOB in order to add value – this is the approach that Archer Capital itself tried earlier this month when it attempted to acquire BankLink for around $100M. But with that deal apparently off the cards, it’s hard to imagine many potential candidates that Bain could take this approach with.
It’s going to be interesting to watch – having spent a small amount of time consulting within MYOB in the past year or two, I can say that their people absolutely understand the change that the industry is undergoing – while the move from desktop to cloud isn’t quite the done deal that people like Drury would like to think, it is an undeniable trend that is growing in momentum. Bain will have realized this from their due diligence and given the price they paid, it would be unlikely that thy believe simply carving out costs from MYOB would give them the returns they need.
I’d like to think that Bain has a cunning plan here – time, as they say, will tell.