MYOB forks out $180M for Reckon's accounting management practice
- 16 November, 2017 09:19
Tim Reed - CEO, MYOB
MYOB (ASX:MYO) has coughed up $180 million in cash for Reckon's (ASX:RKN) Accountants Group, as it works to focus on the smaller end of the market.
Under the deal, MYOB will take on all clients, intellectual property, systems, processes and more than 120 employees from its fellow publicly-listed accounting software vendor.
Reckon will retain its Business and Legal Practice Management divisions, which make up about 50 per cent of its group revenue and EBITDA.
According to Reckon, the move will help accelerate its long-term strategy to offer small businesses a complete suite of cloud solutions as well as pursue opportunities in the legal market.
Reckon Group CEO, Clive Rabie, said combining the two businesses that are strategically and culturally aligned under the MYOB group, presented a compelling opportunity and long-term benefits for clients, staff and investors.
“With the resources afforded by MYOB, we are confident the team will continue to be a trusted partner and strategic adviser to new and existing clients,” Rabie said.
“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.”
The Accountants Practice Management division includes three product lines - Reckon APS, Reckon Elite, and Reckon Docs that provide accounting, tax compliance and related software to more than 4000 large and small accounting practices in Australia and New Zealand.
The deal delivers additional shareholder value at 35 per cent above market cap, exceeding market cap for the whole Reckon Group. Proceeds will be used to pay off its debt and a special dividend will also be paid to shareholders.
MYOB CEO, Tim Reed, said the acquisition will accelerate the delivery of its online practice suite to bring advisers online faster and provide an online migration path for Reckon's clients to the MYOB platform. It plans to use the earnings contribution from Reckon in the first two years to fund its investment in sales and marketing of its online SME and practice tools.
“We’re looking forward to the next exciting phase of our business, bringing to life our vision of the Connected Practice and delivering connectivity, efficiencies and growth opportunities to advisers and SME businesses across Australia and New Zealand,” Reed said.
The sale will be completed by the second quarter of FY18 subject to approval from the Australian Competition and Consumer Commission (ACCC) and the New Zealand Commerce Commission (NZCC) regulatory processes.
In the 12 months ending 31 December 2016, Reckon achieved $97.8 million in revenue (up seven per cent) and EBITDA was $35.3 million (down four per cent). Net profit was $11 million down 25 per cent.
Reckon’s Business Division, which generated $35 million in revenue, maintains a network of more than 700,000 small businesses and features business accounting and personal wealth management software and solutions such as Reckon One, Reckon Accounts and Reckon Loans.
Its Legal Practice Management Division ($13 million revenue) predominantly operates in the US and UK, specifically focusing on print and scan solutions – nQueue Billback.
The latest move follows the de-merger of Reckon’s Document Management division and subsequent listing on the AIM market of the London Stock Exchange GetBusy (AIM:GETB), as part of the company’s ongoing journey and long-term strategy to unlock shareholder value.