Sage, the accounting software company, has become the preferred bidder in the race to take over Australian rival MYOB for more than A$1.3bn (£828m, $1.4bn).
Sage, one of the UK’s largest software vendors, has outbid Bain Capital and KKR, people familiar with the situation said, in a sign that shaky debt markets were hampering private equity groups’ ability to gain the upper hand against strategic buyers.
The US buy-out groups had struggled to bid aggressively after debt markets turned sour in recent weeks. In the final round last week, Bain raised the equity contribution from 40 to 50 per cent, hoping it could refinance a possible deal later if high-yield markets regained their risk appetite.
A successful takeover would be the first big deal for Guy Berruyer, who took over as Sage chief executive last year, and would mark a resumption of the strategy that has been the driving force behind its growth.
An acquisition of MYOB would more than double Sage’s previous record deal in 2008 when it paid £315m for Emdeon, the US healthcare software group.
The price tag of more than $1.3bn for MYOB implies a ratio of enterprise value to last year’s earnings before interest, tax, depreciation and amortisation of about 13.5 times.
Slightly lower multiples have been paid by buy-out groups in the accounting software sector. Last year, Visma was sold for about 12.5 times earnings, while TeamSystem was bought for more than 11 times.
Sage on Wednesday confirmed that it was considering an acquisition of MYOB, though there was “no certainty that it will proceed”.
Vijay Anand, analyst at Espírito Santo, said: “Sage has done similar acquisitions in the past. When it goes into a new geography it tries to scale up.”
MYOB provides software and support to more than 1m businesses in Australia and New Zealand. Archer Capital and HarbourVest Partners, the private equity firms, bought the company for A$450m in January 2009. They have hired UBS to advise on the sale, while Sage has retained Deutsche Bank as its adviser.
Shares in Sage fell 3.6p to 245.6p.