21st Aug 2011. Bain Capital announced today that it has signed a definitive agreement to acquire MYOB Ltd, Australia’s largest independent software vendor, from a consortium led by Archer Capital that also included international investment firm HarbourVest Partners. Whilst financial terms of the transaction are confidential and have not been disclosed, press speculation puts the deal at approximately A$1.2bn.
The price tag implies a ratio of enterprise value to last year’s earnings before interest, tax, depreciation and amortisation of about 11.5 times. This is equivalent to the 2011 purchase of Epicor by Apax Parrtners (13.4 times), Info’s recent purchase of Lawson Software (12 times), and the 2010 Kohlberg Kravis & Roberts (KKR) purchase of Norway’s Visma (12.5 times earnings) from HgCapital, and Hg Capital’s acquisition of Italy’s TeamSystem from Bain Capital (11 times).
The bid is understood to have pipped a A$1.3bn offer from UK’s Sage Software, which is understood to have been complicated by a drop in Sage’s share price, meaning the acquisition could be worth more than 25 per cent of its market value and require a shareholder vote. It was not clear that Sage, one of the UK’s largest software vendors, would get the required support from shareholders. This prompted MYOB’s owners, Archer Capital, to look elsewhere and accept a bid worth 10 per cent less.
The acquisition gives Bain Capital a majority stake in MYOB alongside MYOB’s management team, led by chief executive Tim Reed and general manager Julian Smith, who will retain their stake in the business.
The deal is the third-biggest local private equity divestment, behind TPG’s $2.3bn float of Myer in 2009, and CVC Asia Pacific and Ironbridge Capital’s $1.4bn sale of Affinity Health in 2005. The purchase is also the biggest Australian foray for Bain. Its previous local investments over a 15-year period include New Zealand’s Frucor Beverages and Australian electronics company Startronics.
The deal is a major coup for Archer Capital, which led a consortium “hostile” buyout of the then-listed MYOB – an acronym for Mind Your Own Business – for $450 million in December 2008.
Archer and HarbourVest acquired MYOB backed by $A250 million in five-year debt from BOS International Australia, ANZ, Westpac Banking Corp, GE Commercial Finance, Calyon, Royal Bank of Scotland, UBS and WestLB, so the Internal Rate of Return for the equity component is particularly strong.
The 2009 buyout saw founder and major shareholder exit MYOB, selling his 28% stake in the company for approximately $125 million, and taking a 24% stake in listed New Zealand compeititor Xero for A$15m. Xero currently has a market cap of approximately A$180m.
Capitalising on the MYOB sale, Archer Capital has announced that it aims to raise $1.25bn from institutional investors for its 5th investment fund.
MYOB is the Australasian market leader in business management and accounting software, having helped make business life easier for over 1,000,000 SME’s across Australia and New Zealand. MYOB’s clients benefit from the company’s innovative solutions that enable businesses and accounting practices to streamline workflows, save time, gain deeper insight into their businesses and foster seamless connections between businesses and their advisors.
Walid Sarkis, a Managing Director at Bain Capital, said: “MYOB is a first class company with an attractive valuation. It has been the leader in the financial software space for SME’s in Australasia for a very long time with a strong proposition focused on customers’ needs. The growth potential in this market is strong, with a growing trend of entrepreneurs starting up their own businesses.”
Craig Boyce, a Managing Director at Bain Capital, added: “We are excited by the prospect of investing alongside the management team of MYOB, to continue developing the terrific business they have built. Together with Archer Capital they have invested to enable the company to further meet the needs of customers, particularly through leading cloud-based capabilities.”
Tim Reed, the CEO of MYOB, commented: “We are delighted with Bain Capital’s commitment to MYOB. We are entering the era of the connected business and are focused on the growth opportunities in front of us, particularly given the strong period of innovation MYOB is enjoying as it moves its business online.”
He continued: “Bain Capital is an ideal partner to take us forward given its proven successes in leading similar companies to higher ground in other parts of the world. Its internationally recognised portfolio group of local management consultants and ex-operations professionals with proven track record can no doubt provide the expertise to take us through our next phase of growth.”
Andrew Gray, Partner, Archer Capital said the business has strong momentum and a bright future with Bain Capital. He added: “MYOB has been a great investment for Archer and our consortium partners. Since acquiring the business in February 2009, we have worked with management to refocus MYOB’s operations and have invested significant capital to expand and improve MYOB’s core product offering and services, in the process almost doubling the business’ earnings base. We are confident that under the new partnership with Bain Capital, the company will continue to be successful.”
Archer Capital was advised by UBS and Bain Capital by Morgan Stanley. Sage Software was advised by Deutsche Bank.
MYOB is a leading provider of business management solutions that have helped more than a million businesses in Australia and New Zealand. MYOB serves businesses of all kinds and sizes, delivering software and services that simplify accounting, payroll, client management, websites, and much more. With a network of more than 20,000 accountants and other professional partners, MYOB provides the tools and support that help make business life easier.
About Archer Capital
Archer Capital (www.archercapital.com.au) is one of Australia’s leading private equity investment houses, with over $2 billion in funds under management or advice and the longest track record of any leveraged buyout manager in Australia.Since 1996, Archer Capital’s Partners and executives have closed over 30 acquisitions involving total aggregate funding in excess of $5 billion across investments that have included Acendia Retail (Rebel Sports), Emeco, iNova Pharmaceuticals, Repco, Tasman Building Products and V8 Supercars.
About Bain Capital
Bain Capital, LLC (www.baincapital.com) is a global private investment firm that manages several pools of capital, including private equity, venture capital, public equity, credit products and absolute return, with approximately $65 billion in assets under management. Since its inception in 1984, the firm has made private equity investments and add-on acquisitions in more than 300 companies worldwide. Bain Capital has a distinctly people-intensive, value-added approach to investing, with a strong emphasis on supporting management teams to drive strategic and operating improvements. Bain Capital Asia, the firm’s Asian private equity affiliate, has been investing with the same philosophy since 2007. Bain Capital private equity investments in Asia have included such leading businesses as ASIMCO, Bellsystem24, Denon&Marantz, Domino’s Japan, Feixiang, GA Pack, GOME, Hero Investments and Lilliput. Bain Capital has offices in Boston, Hong Kong, Shanghai, Tokyo, Mumbai, London, Munich, Chicago, and New York.