Accounting software company MYOB’s recent purchase of data aggregator BankLink has divided the industry on whether MYOB’s owner Bain Capital snatched a bargain or overpaid.
Saasu CEO Marc Lehmann has no doubt that BankLink was a great buy at $114 million.
“I just reckon it’s an absolute steal and I think there a whole lot of bankers running around saying how did we miss that? MYOB has absolutely stolen that asset,” Lehmann said. “BankLink has sold at one tenth of the value of Xero despite having way more customers. It’s a comparable customer base to MYOB but at one-tenth of the value of MYOB which is a ridiculous scenario.”
Lehmann said BankLink was worth double or triple the price today but could have been worth ten times more if it had reinvented itself as a cloud software company. An overlay of online accounting applications, either in-house or a deal with an existing competitor, could have turned it into a billion-dollar company really quickly, Lehmann said.
“The problem was with the management team, it was just too old thinking. Their failure to spend a few million bucks to try to develop a cloud platform has cost them hundreds of millions of dollars,” Lehmann said. “I think the investment banking community and the wider software community feels like they missed the boat on BankLink seling at that price.”
Not all industry figures agreed with Lehman’s assessment. “I don’t agree with Marc’s opinion – mainly due to the fact that Xero, Reckon and others are now doing their own thing with the banks,” said an accounting software CEO, speaking on condition of anonymity. “Bain paid too much.”
Xero CEO Rod Drury agreed that BankLink was a smart buy for MYOB given rumours that it may go public again. “So if an IPO exit is planned then the MYOB acquisition of BankLink, which presumably carries little debt, makes sense to top up any revenue gaps,” Drury said.
A financial analyst covering the accounting software companies agreed that MYOB got a good price.
“I think it made sense for Bain. They have a real incentive to lift the earnings base and improve the connectivity between MYOB and accountants and be perceived to be proactive,” said the analyst, who asked to remain anonymous.
Customer relationships were ultimately more valuable than the quality of the product in the battle for market share, the analyst added. “If this is about building out relationships with accountants then that’s the real battleground (for accounting software). Xero themselves would seem to think that because that’s where they’re spending all their marketing dollars and their time,” the analyst said.
MYOB had also taken a prized asset off the table. Had Xero bought BankLink they would have had an instant customer base to which they could sell their product.
“I’m sure that was something MYOB took into account when they made the transaction,” the analyst said.