SYDNEY (Reuters) - Private equity firm Bain Capital has clinched a deal to buy Australian accounting software company MYOB for about $1.3 billion, trumping UK’s Sage Group (SGE.L) and Kohlberg Kravis Roberts & Co (KKR.N).
The deal is Bain’s biggest acquisition in Australia, and gives the Boston-based buyout company a majority stake in the country’s leading business software developer.
Bain signed a definitive agreement with buyout group Archer Capital to acquire MYOB, the companies said in a joint announcement on Sunday, confirming a Reuters story on Saturday.
Sources familiar with the matter said Bain agreed to buy MYOB for about A$1.2 billion ($1.3 billion). The companies declined to provide the deal value.
MYOB, an abbreviation of the phrase ‘Mind Your Own Business’, was being sold by Archer Capital and HarbourVest Partners LLC, which bought it for about A$450 million in 2008.
Bain and KKR re-entered the race for MYOB after market turmoil derailed Sage’s attempt to buy its Australian peer.
Sage had entered exclusive talks with MYOB’s private equity owners, after outbidding its rivals with an offer of about A$1.4 billion, sources said previously. But a drop in its share price and the need for shareholder approval forced the company to abandon its bid, sources said.
The sources declined to be named as they were not authorized to talk to the media.
MYOB specializes in small and medium enterprises (SMEs), a sector which Bain said has strong growth potential, as more entrepreneurs are starting up businesses.
“It has been the leader in the financial software space for SMEs in Australasia for a very long time with a strong proposition on customer’s needs,” said Walid Sarkis, a managing director at Bain.
‘The growth potential in this market is strong, with a growing trend of entrepreneurs starting up their own businesses,” he said.
The Bain deal values MYOB at around 11.3 times earnings before interest, tax, depreciation and amortization (EBITDA), around 10 percent below the failed Sage bid but comparable to similar recent deals in the sector.
In 2010, KKR paid around 12.5 times EBITDA for a majority stake in accountancy software vendor Visma, while HG Capital bought Italy’s TeamSystem for 11.3x EBITDA, UBS said in a research report.
The bulk of Bain’s Asia assets are in Japan and Greater China. MYOB would be its third and largest Australia/New Zealand portfolio company.
Bain Capital, originally led by U.S. presidential candidate Mitt Romney when the firm spun out from consulting group Bain & Co., is currently raising an up to $2 billion fund to invest in Asia.
Bain’s winning bid for MYOB was backed with a A$525 million financing from Bank of America Merrill Lynch, Deutsche Bank, HSBC, Morgan Stanley, National Australia Bank, Westpac Banking Corp and UBS, according to a source familiar with the matter.
UBS UBSN.VX advised Archer and HarbourVest. Morgan Stanley (MS.N) advised Bain. Law firm Ropes & Gray LLC were international counsel to Bain.
Editing by Anshuman Daga