The UK-based Sage Group recently announced their acquisition of accounting software company Intacct, paying a substantial $850 million. This represents a remarkable multiple of about nine times revenue, which makes for a great exit for Intacct investors, management and staff. Intacct has been around since 1999 and had long sought an IPO for an exit. However, with an uncertain IPO market, this sale makes much more sense for the patient Intacct investors and employees.
So what does it mean for all the players?
For Intacct, it means access to more development resources and better access to grow internationally beyond their core North American base. The challenge will be to execute a careful integration and keep the focus on the business without losing their employee base that may be thinking of their next opportunity. The recently announced pay-to-stay retention plan should help to mitigate this attrition risk at least for the next 12 months.
For Sage, it means a more complete cloud product offering with a lineup ranging from simple accounting tools for solo entrepreneurs to fully integrated solutions for large enterprises. It also gives them possibly their last chance to get back into the North American market and become a serious market contender.
One of the more promising market developments may be for emerging tech firms looking to grow beyond QuickBooks. Finding an appropriate financial management system continues to be a challenge for many tech firms beyond the startup stage. I have long believed a better product was needed for small but growing technology firms. Simply put, QuickBooks is not robust enough while Intacct is overkill for the many emerging tech firms. There needs to be a product somewhere in the middle.
As I stated in a previous post (Outgrowing QuickBooks? Is Intacct the Answer? A Quick Look at What Types of Companies Can Benefit From an Upgrade), if QuickBooks is like driving a car, then Intacct is like flying a plane. You can travel a lot farther with Intacct, but you really need a professional pilot to get you there. Something in-between the two solutions is clearly desired.
Will we see Sage step up and skillfully position one of their products between Intacct and QuickBooks? Could that be their Sage Live product? If so, they need to develop more industry-specific tools and move beyond just selling the benefits of the cloud. That way, we can finally get closer to an effective cloud system designed to manage the business and not just the accounting department.