In February 2009, private equity firm Archer Capital acquired then publicly-listed MYOB for $558m. After a round of improvements, the maker of accounting software was then sold in 2011 for $1.2bn to a new private equity owner, Bain Capital.
Now, coming full circle, Bain wants to float MYOB for twice what it paid – a market cap of $1.9bn to $2.3bn – claiming it’s a more streamlined company with significantly improved prospects. Is such a rapid turnaround really possible?
Revenue increased 16% in 2014 and MYOB is said to have a 60% to 65% share of the accounting software market for small-medium sized businesses in Australia and New Zealand. The company also has high returns on capital, a reputable brand and rapidly growing market, so there’s plenty to like.
However, the float is stirring controversy as rival Xero recently claimed MYOB’s customer numbers are being overstated to hide the fact that it’s losing market share to Xero in the fast-growing internet-based (cloud) software space.
After reporting that it had 1.2 million customers, MYOB was forced to clarify in February that only 500,000 were paying customers, with just 116,000 using cloud products, compared to Xero’s 400,000 paying cloud-based customers.
MYOB is being offered at $3-4 a share, which is roughly 15-17 times pro-forma operating earnings and implies a dividend yield of 2.8-3.3%.
We’ll assess the merits of investing on Share Advisor before the offer closes on 27 April (you can sign up for a free trial here).