Australia's MYOB is buying New Zealand firm and fellow accounting software provider BankLink for NZ$136 million from privately held Media Transfer Services Limited.
MYOB, which is majority owned by private equity group Bain Capital, says the deal is subject to a number of conditions including regulatory and third party consents, but is expected to be completed next month.
In a statement released to the Australian Securities Exchange MYOB said having BankLink's bank feeds available would be a distinct competitive advantage in developing MYOB’s cloud accounting strategy.
"BankLink is a highly successful organisation," MYOB said. "The BankLink Service is used by nearly 5,000 accounting practices, and more than 320,000 small businesses throughout New Zealand and Australia. Each month, it securely delivers in excess of 13 million customer transactions from more than 100 banks, credit unions, brokers and fund managers."
MYOB says it'll fund the acquisition through NZ$75 million of senior bank debt, with the balance coming through shareholder equity.
"Accounting is going through a period of rapid innovation," MYOB CEO Tim Reed said.
"Cloud solutions (products and services) are replacing desktop applications; bank feeds are a key component of a cloud solution, as they are used as source data for the accounts. The benefits of automatic bank feeds are huge; they significantly reduce the time it takes to do the books. If you are running a small business, it is essential to have accurate financials. BankLink has proprietary methods of supplying accurate, reliable and secure bank feeds that are more accurate and secure than others.”
BankLink’s British-based European business isn't included in the acquisition. To be renamed “Bankstream” it's being retained by BankLink director Derek Jones. BankLink was founded by Malcolm MacDonald, Jones and Steve Agnew in 1986. All three are still listed as shareholders of Media Transfer Services.
Last November BankLink won an award at the AUT Excellence in Business Support Awards in the "Large Business NZ$10 million to NZ$50 million turnover" category. See a video interview with BankLink's Richard Rees here.
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Xero's Rod Drury has put out a press release on this deal. Here it is;
MYOB's purchase of BankLink will have no impact on Xero's current growth strategy. MYOB already uses the BankLink service to provide bank feeds for its customers, so this acquisition provides no change to the competitive landscape.
Xero CEO Rod Drury says "the acquisition gives the accounting market a clear choice, between Xero's purpose-built pure cloud accounting service with integrated bank feeds versus a patched together solution involving hybrid desktop software and bank feeds that are charged per transaction."
Xero General Manager New Zealand Amanda Armstrong says Xero already has direct feeds in NZ and Australia for all the major banks. "MYOB will have a lot of work to do to catch up on where we're at with our overall integrated solutions and current developments."
"Accountants we've talked to so far are concerned the BankLink acquisition will slow MYOB down on making essential improvements to their core accounting products and distract them from delivering a fully functional cloud offering," she says.
Paul Pettit, a partner of Wellington based accounting firm Curtis McLean, says MYOB needs to be focusing on its own software. "It's great to see MYOB taking steps with bank feeds but usability is their real issue. The bank feeds are only the start of the accounting system. The benefit of Xero is that it is just nice to use and has an entire ecosystem of apps around it. With updating an old system it's a lot harder."
Active Chartered Accountants director Ben Shaw agrees and says "MYOB has taken too long to embrace the technology behind bank feeds and to recognise the need for making them more client-focused rather than accountant-focused."
Drury says "Bain, the US Private Equity owners of MYOB, are signaling an IPO as their exit. With Xero making serious inroads in the accountant practice and tax tools market the deal makes sense for MYOB to add revenue in the face of its growing debt."
Xero has announced it is working with leading financial institutions on the next generation of banking services and is making good progress on rural data feeds. This week Xero was awarded best in show by US financial institutions at the Barlow Research Client Conference, for its innovative integration plans.
The small business accounting software industry in Australia has seen a period of significant consolidation. CCH (part of AMS Listed Wolters Kluwer) acquired Christchurch based Acclipse last year. The exit of BankLink's owners leaves Reckon (ASX) and Xero (ASX/NZX) as the primary Australasian-owned companies now competing with MYOB and CCH.
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