Cloud accounting software provider MYOB is set to acquire the Accountants Practice Management division of competitor Reckon for $180 million in cash.
The division provides practice software solutions to over 3,000 accounting practices across Australia and New Zealand through three product lines, Reckon APS, Reckon Elite, and Reckon Docs.
As part of the deal, MYOB will acquire the division’s IP, clients, systems and processes, with around 120 employees to be offered jobs at MYOB.
The sale is a strong one for Reckon, with the division’s net assets as of the end of October sitting at $38 million.
Clive Rabie, Group CEO of Reckon, said the price offered by MYOB presented a “compelling offer”, adding that Reckon had “always maintained that the sum of its parts is worth more than the value that has been attributed to the whole by the market”.
“The move marks a significant step forward for Reckon, as we look to narrow our focus on the small business accounting software market, further fuelling momentum in an area that’s rife with untapped opportunities especially as more enterprises look to the cloud.”
Set to be finalised in the second quarter of financial year 2018, the acquisition will be funded by a committed debt facility, with an integration fund of $50 million to be created in order to facilitate the integration of the two businesses.
According to MYOB, the majority of this will go towards further developing MYOB’s online practice tools, and developing online migration tools for Reckon’s clients.
MYOB CEO, Tim Reed said the acquisition ties into the company’s vision of the ‘connected practice’ and its aims to deliver efficiencies and growth opportunities to advisers and businesses.
“It will deepen our relationship with more than 3,000 accounting practices, the most trusted advisers to SMEs and people who we know play an integral role in the business lives of SMEs,” he said.
With the deal subject to approval from both the Australian Competition and Consumer Commission and the New Zealand Commerce Commission, MYOB stated it plans to reinvest the first two years of earnings generated from Reckon’s Accountant Group to fund increased investment in sales and marketing.
The acquisition comes a week after fellow cloud accounting software company Xero previewed plans to de-list from the New Zealand stock exchange and consolidate its trading on the ASX.
Xero CEO Rod Drury said the decision comes as 80 percent of the company’s revenue is coming from outside New Zealand.
“Our strategy is to drive further growth in markets like UK, North America, and Southeast Asia,” he said.
“As Xero continues to grow, gaining enhanced access to deeper capital markets, increased liquidity, and a broader base of potential investors is critical to fulfilling our ambition to be the leading global small business platform serving millions of customers.”
Image: Tim Reed.