Sage, the accounting software group, has pulled out at the last minute from the €600m (£499m) auction of TeamSystem, the Italian business management software group.
The surprise decision, made at a meeting of Sage’s board on Thursday, has left the door open to HgCapital and Cinven, the remaining private equity bidders.
The withdrawal by Sage indicates an early sign of caution by Guy Berruyer, who was named as chief executive of the group two weeks ago.
People familiar with the auction had seen Sage as the favourite to buy TeamSystem and expected the Newcastle-based software group to submit the highest offer by Friday’s deadline for final bids.
But a person close to Sage said it had decided the auction was too pricey and TeamSystem was not a good strategic fit.
Sage would be better served by making smaller add-on acquisitions and expanding in the key US market, the person said.
TeamSystem, which was bought by Bain Capital in 2004 for €274m, would have been Sage’s biggest acquisition and required the London-listed group to re-lever its balance sheet after cutting its net debt in half to £280m in the past year.
It was unclear on Friday night if Cinven or HgCapital had submitted the highest offer for the Italian company. But people said after Sage’s exit the price could fall below €600m.
HgCapital has seen off competition from Sage before, outbidding it four years ago in the auction of Visma, the Norwegian software group.
Mr Berruyer, a 59-year-old French national, was promoted from head of Sage’s mainland European operations.
He beat several internal board candidates to the post, replacing the departing Paul Walker, who stood down after 16 years as chief executive.
Investors have since been concerned that key executives including Paul Harrison, chief financial officer, and Paul Stobart, head of UK operations, might leave the company, having applied for the CEO job and missed out.
Mr Harrison in particular had been a prominent “face” of the company alongside Mr Walker.
Tony Hobson, chairman, said Mr Berruyer would be talking to the company’s top executives following his appointment.
Sage, HgCapital, Bain and Cinven all declined to comment.
Sage shares closed down 1p at 238.9p.