Sage in lead to buy IT group with €650m bid

Sage, the accounting software group, has emerged as the frontrunner to acquire TeamSystem, the Italian business management software group, for up to €650m (£542m).

Final bids for TeamSystem are expected on Friday for the business that has been put up for sale by Bain Capital, the US private equity group. People close to the situation said Sage was expected to outbid HgCapital and Cinven, the private equity groups.

However, one person close to the sale said the auction of TeamSystem, which Bain acquired in 2004 for €274m, was still competitive and the outcome was uncertain.

An acquisition by Sage would represent an early move by Guy Berruyer, who was named as chief executive of the group just two weeks ago.

It would also signal a return to the acquisition trail by Sage after several barren years.

The Newcastle-based group was a regular dealmaker during two decades of rapid growth as it sought fresh impetus to acquire more customers. Its acquisition-led strategy reached a peak in 2006 when it spent £617.5m, including its largest deal to date: the £307m purchase of Emdeon Practice Services.

If Sage does buy TeamSystem it would be a role-reversal from four years ago when it was outbid by HgCapital for Visma, the Norwegian software group.

Mr Berruyer, a 59-year-old French national was promoted from head of Sage’s mainland European operations, beating off competition from Paul Harrison, chief financial officer, and Paul Stobart, head of UK operations, to replace the departing Paul Walker, who stood down after 16 years as chief executive.

Sage has fallen behind rivals in key emerging technology areas, such as offering software as a service to customers rather than the traditional off-the-shelf software that customers load on to their own computers.

Many shareholders have been hoping that new leadership would be able to take action to catch up.

In the US, Microsoft and SAP have targeted the top end of Sage’s market while Kashflow and Netsuite have targeted smaller potential customers.

While Sage has waited for its markets to rebound, it has focused on generating cash to reduce net debt, which has fallen from £558m in March 2009 to £280m in June 2010.

The group has a £650m syndicated bank facility expiring in August 2011 and plans to complete its refinancing during 2010.

Under Bain’s ownership, TeamSystem has grown rapidly by acquiring smaller Italian rivals in the market for providing business management software to help small and medium-sized businesses with accounting, human resources and payroll.

Sage, HgCapital, Bain and Cinven all declined to comment. Sage shares closed down 4.7p at 243.8p.

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