MYOB has done a $180 million deal to buy a key part of its competitor Reckon, giving it a step up in the highly competitive accountancy software business.
The company, whose key competitor is cloud-based subscription accountancy player Xero, is buying the assets of the Accountant Group in Australia and New Zealand which provides software solutions to accounting practices.
The book value of the Reckon asset was $38 million. The division’s 120 employees will be offered jobs at MYOB.
MYOB chief executive Tim Reed says the deal will deepen the company’s relationship with more than 3,000 accounting practices.
“Through this acquisition we will be able to accelerate the delivery of our online practice suite to bring advisers online faster and provide an online migration path for Reckon’s Accountant Group clients to the MYOB Platform,” he says.
The deal, which will be funded by debt, is part of a series of acquisitions over the past four and a half years, including BankLink, PayGlobal, ACE Payroll, IMS Payroll, Greentree and Paycorp.
The company plans to use the earnings from Reckon’s Accountant Group in the first two years to fund increased investment in sales and marketing.
MYOB’s latest half year results showed revenue up 14% to $204 million and after tax profit 13% to $28.3 million.
Reckon CEO Clive Rabie says combining the two businesses under the MYOB group presents a compelling opportunity for clients and investors.
“The combined business provides efficiencies and resources that will enable long-term benefits for our clients and employees,” he says.
“The sale price offered for the transaction represents a compelling offer which is in the best interests of all shareholders.”
The deal leaves Reckon with its Business and Legal Practice Management divisions.
“The transaction represents an opportunity to permit Reckon to narrow its focus on its Business and Legal divisions and pursue growth in the online small business accounting software market as well as pursue opportunities in the legal market, particularly in scan and print solutions,” says Rabie.
“We believe that we can add substantial value to the continuing businesses by focusing on converting a higher proportion of revenue to subscription and cloud.”
The acquisition is subject to approval from the Australian Competition and Consumer Commission and the New Zealand Commerce Commission.