MYOB pulls out of Reckon Accountants Group acquisition

MYOB has announced it will no longer be pursuing the AU$180 million acquisition of Reckon's Accountants Group assets.

In a letter issued to shareholders of both companies on Thursday, MYOB highlighted it wasn't prepared for how long the regulatory process of the acquisition was going to take, and said as a result it has pulled the pin on the purchase.

"The regulatory process has taken considerably longer than the parties anticipated and could continue for some time," MYOB wrote.

"The sale and purchase agreement had a six-month duration within which the conditions precedent to completion had to be satisfied (including the regulatory conditions) failing which either Reckon or MYOB could terminate the contract."

The Australian Competition and Consumer Commission (ACCC) in late March highlighted concerns over the proposed acquisition, fearing MYOB might gain a market monopoly if it were to proceed.

The ACCC's preliminary view was that the proposed acquisition was likely to substantially lessen competition in the supply of practice software to medium and large accounting firms. It was also concerned that if MYOB had a monopoly, it would substantially lessen competition in the local market.

"We think there's a significant risk for customers that prices will increase and service levels will decrease," ACCC Commissioner Roger Featherston said at the time.

"There are other suppliers of this software, but market feedback suggests those products are less sophisticated, and that they are unlikely to be able to develop the more advanced functionality for several years at least."

According to MYOB, while it hadn't changed its rationale for the acquisition, the delays in the ACCC and the New Zealand Commerce Commission process had "created uncertainty in the business to be acquired with the potential to impact on its trading".

Neither Reckon nor MYOB could agree on mutually acceptable terms to extend the acquisition contract.

MYOB said it will instead be "accelerating organic investment", which includes the further development of its platform with a AU$50 million commitment to R&D over the next two years and AU$30 million into sales and marketing.

"This investment will bring new online Adviser and SME solutions to the market more quickly, allowing MYOB to retire legacy solutions," the company explained.

For the 2017 fiscal year, MYOB reported AU$60.7 million in after-tax profit, a 16.3 percent increase over its 2016 figure.

Revenue for the 12 months to December 31, 2017 was AU$416.5 million, while underlying earnings before interest, taxation, depreciation, and amortisation (EBITDA) totalled AU$190 million.

For the same period, Reckon reported AU$2.2 million in after-tax profit, on revenue of AU$48.9 million.

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