Bain buys MYOB as markets sink Sage bid

Barely 48 hours later, UK software maker Sage Group entered the race, tabling an offer of A$1.3 billion and soon sources familiar with the situation were telling AVCJ that the private equity firms had been beaten.

According to reports, Bain and KKR were struggling to generate sufficient leverage due to weak global debt markets. Bain, it was said, had raised the equity portion of its bid from 40% to 50% with a view to refinancing the deal once the appetite for high-yield bonds was restored.

But it was then Sage's turn to fall afoul of the global markets. At the beginning of August, the company's share price stood at GBP2.76; when it confirmed the potential MYOB acquisition on August 17, Sage's stock was down 11.5% at GBP2.44. This decline meant the value of the acquisition could amount to more than 25% of Sage's market value, requiring a shareholder vote for it to go through.

Uncertain about the chances of winning approval for an acquisition more than twice the size of the GBP315 million paid for US healthcare software group Emedeon in 2008, Sage apparently abandoned its bid.

The private equity firms were back in pole position and Bain duly agreed to buy MYOB for a reported sum of around A$1.3 billion. It was said to have secured A$525 million in financing from Bank of America Merrill Lynch, Deutsche Bank, HSBC, Morgan Stanley, National Australia Bank, Westpac Banking Corp and UBS.

The deal values MYOB at approximately 11.3x reported EBITDA in 2010. This is broadly comparable to the 12.5x that KKR paid last year for a majority stake in software vendor and the 11.3x HG Capital agreed for Italy's TeamSystem, also in 2010, according to a UBS research report.

It represents a healthy return for Archer and HarbourVest, which purchased the company in January 2009 for around A$450 million (then $296 million). Their original asking price was A$1 billion. It is the third highest private equity exit in Australia, after TPG's A$2.3 billion listing of Myer in 2009 and the A$1.4 billion sale of Affinity Health by CVC Asia Pacific and Ironbridge Capital in 2005.

MYOB's products and services are said to be used by more than one million small- and medium-sized enterprises (SMEs) and accounting firms in Australia and New Zealand. "The growth potential in this market is strong, with a growing trend of entrepreneurs starting up their own businesses," said Walid Sarkis, a managing director at Bain.

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• Topics
• Buyouts
• Australasia
• Exits
• Bain Capital Asia
• KKR
• TPG Capital
• CVC Capital Partners
• Archer Capital
• Ironbridge Capital
• HarbourVest Partners