The proposed acquisition of GreatSoft by MYOB has hit a potential roadblock, after the competition watchdog raised concerns the deal could “substantially” hamper competition in the accounting software sector.
MYOB revealed plans to acquire South African-owned GreatSoft in October 2020, as a means to bolster its cloud-based practice management software capabilities.
However, the Australian Competition and Consumer Commission (ACCC) said on Thursday it is concerned the deal would give medium and large accounting firms the choice between only three major suppliers of practice management software.
The ACCC considers medium-to-large accounting firms to be those with more than 26 employees.
“GreatSoft is a new entrant that has won several medium-to-large MYOB customers, and we are looking into its potential to grow stronger,” said ACCC commissioner Stephen Ridgeway.
Ridgeway said the ACCC has received feedback from accountants that many are looking to move away from desktop-based software, to cloud-based products, such as those offered by GreatSoft.
“While GreatSoft’s customer base is currently small, the ACCC is investigating its potential to become a strong competitor as it appears to be a viable choice for many medium-to-large firms wishing to migrate to the cloud,” he said.
GreatSoft entered the Australian market in 2018 and officially launched in September 2019. Its practice-management product integrates with a number of third-party suppliers, including Xero, which is one of the other major providers in the market, alongside Reckon APS.
When MYOB announced the proposed acquisition in October, GreatSoft had about 1,000 customers in 19 territories, including Australia and New Zealand, while MYOB had 40,000 accountants, bookkeepers and consultants in its network.
“It appears difficult for new competitors to enter this market,” added Ridgeway.
“Software suppliers have to invest significant time and resources to develop functionality to meet the needs of larger accounting firms, and require a proven track record in order to convince accounting firms to switch software.
“While GreatSoft itself faced some of these challenges, we consider that as it has operated in Australia for the past two years, it may now be well placed to overcome them.”
Speaking to SmartCompany, Tony Greco, general manager of technical policy for the Institute of Public Accountants (IPA), says while practice-management software is a relatively niche area, “accounting practices are the gateway to a lot of businesses, and so what impacts them impacts the wider economy”.
Greco says the IPA would like to see the ACCC consider how the proposed deal will affect its members on a range of fronts, including in relation to pricing, access to data and product development.
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“Certainly it is a concern if there are only three major players,” he says.
Interested parties will now have until March 5 to make a submission in response to the ACCC’s statement of issues. A decision is expected to be made on April 22.
The ACCC previously raised concerns about MYOB’s proposed acquisition of Reckon’s accountants group assets in 2018, in a deal that ultimately did not proceed.
SmartCompany contacted MYOB but the company declined to comment.