The Sage Group To Acquire Intacct For Financial Management Solutions – Sage Group plc (The) (OTCMKTS:SGGEF)

Quick Take

The Sage Group plc (OTC:SGGEF) has announced an agreement to acquire financial software maker Intacct for $850 million.

Intacct has developed a suite of cloud-delivered enterprise financial management [ERP] software that can be tailored to each customer’s workflows and reporting requirements.

Although not a cheap deal by any means, the acquisition will significantly expand and diversify Sage’s offerings, customer base and geographic footprint, which makes sense.

Target Company

San Jose, California-based Intacct was founded in 1999 to provide financial management and accounting software for businesses and CPA firms.

Management is headed by CEO Robert Reid, who has been with the company since 2009 and was previously CEO and President of LucidEra and Group Vice President, CRM On Demand at Oracle (ORCL).

Below is a brief demo video about Intacct’s approach:

(Source: Intacct)

The company is primarily focused on middle market customers and says it has become ‘the largest independent mid-market cloud ERP company.’ It handles more than $150 billion in annual transactions between over 11,000 customers.

Since 2000, Intacct has raised over $130 million from a large syndicate of venture capital firm investors, with its most recent round a $40 million debt deal in May 2016 with Silicon Valley Bank (SVB).

Acquisition Terms and Rationale

Sage is acquiring Intacct for $850 million in cash and rolled over Sage options, which are valued at $43 million out of the $850 million total transaction value.

As of the 12 months ended June 30, 2017, Intacct posted recurring revenues of $96 million (Unaudited), so Sage is paying a Price/Sales multiple of 8.9x for Intacct’s three-year CAGR of 33%.

That’s not cheap, even taking into account Intacct’s significant growth rate over the previous three-year period.

A comparable basket of publicly held software company valuations compiled by the NYU Stern School in January shows a Price/Sales multiple of 4.2x. While…

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