SME accounting software giant MYOB has an other set of private equity owners after Archer Capital sold the business to US private equity firm Bain Capital for an estimated $1.2 billion in a deal.
The deal represents a strong return for Archer, which bought MYOB in 2009 for $560 million and has invested about $75 million into the business to help fund its transition from selling desktop-based software to online solutions.
MYOB’s management team, led by chief executive Tim Reed and general manager Julian Smith, will retain its stake in the business.
Smith told SmartCompany that the MYOB team took the strong bidding for the business as an endorsement of its strategy and growth potential but emphasised customers would not see any differences under the new owners.
“There is absolutely no change. For us it is very much business as usual. What it does do is bring additional resources from Bain Capital to support what we are doing.”
Bain would appear to be a good fit for MYOB as it knows the SME accounting space. For six years the company owned a similar Italian firm called TeamSystems – this business was sold last August for a profit of about €280 million.
Bain Capital’s managing director Walid Sarkis described MYOB’s valuation as “attractive” and praised its market leadership position in Australia.
“The growth potential in this market is strong, with a growing trend of entrepreneurs starting up their own businesses.”
Bain’s success in the fight to buy MYOB came as something of a surprise. Global accounting firm Sage appeared on the front runner late last week, but pulled out of the running apparently amidst concerns it may not win shareholder approval for a takeover of MYOB.
However, Tim Reed told the Australian Financial Review that having another private equity company involved in the ownership of the business may have been a better outcome as there will be relatively little change to how the business operates, whereas there would have been integration requirements under a deal with Sage.
Reed says that the company will continue to invest in product development as it seeks to keep up with could-based competitors such as Xero and Saasu.
“Under we invested over $75 million in the past three years in our products and the business case that Bain invested under was based on that high level of investment. Basically they know that R&D spending is ultimately what drives the economics of our business.”
The MYOB deal can also been seen as a victory for the private equity sector after a tough year in which some firms have struggled to exit their investments by selling or floating businesses.
Archer has been one of the most active firms this year. As well as selling MYOB it has sold Cellarmasters Wines to Woolworths and bought Quick Service Restaurants (owner of the Red Rooster and Oporto brands), a stake in the V8 Supercars franchise and a health group called HealtheCare.
Last night Archer launched a $1.25 billion capital raising for new fun called Fund 5.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
