Small business accounting services provider MYOB has abandoned its planned $180 million acquisition of Reckon’s Accountant Group assets, after the regulatory process took longer than expected.
The planned acquisition was announced in November last year, with a sale and purchase agreement having a six-month duration, however MYOB has pointed to a “considerably longer” regulatory process than had been anticipated, which “could continue for some time”.
MYOB said the parties were unable to agree to terms to extend the contract, which had also been subject to a review by the Australian Competition and Consumer Commission. In March, the ACCC outlined competition concerns about the proposed acquisition, with ACCC Commissioner Roger Featherston stating at the time that if the acquisition went ahead, MYOB “would likely be the only supplier of practice software suitable for medium-to-large accounting firms”.
“If MYOB has a monopoly on this software, it would substantially lessen competition,” Featherston said. “We think there’s a significant risk for customers that prices will increase and service levels will decrease.”
According to Fairfax, MYOB chief executive Tim Reed says the company had gone into the proposed deal “confident that it would not diminish competition”.
“We have pursued this for the whole six months and done everything we could to get all the conditions completed [so the deal could progress],” Reed said.
“We had teams working on this right up until Thursday’s announcements … but a number of things have taken place … and our business has continued to thrive and we’ve seen an uptick in referrals from accountants.”
In a statement on Thursday, MYOB said it will instead continue with its strategy to fast-track the delivery of its “Connected Practice vision”, and the development of an online platform for advisers and SMEs.
The company plans to spend $80 million over two years to develop the platform, and is targeting over 1 million online subscribers by 2020.
“Whilst the acquisition will not complete as planned, we are excited about the opportunity to accelerate the organic growth in our business,” Reed said in a statement.