Newcastle-based accounting software specialist Sage last week continued its march towards global domination with its #88m acquisition of its Atlanta-based counterpart Peachtree Software.
Peachtree, a leading name in the US small business market, brings around 1m users into the Sage fold. Its profits for the year to 31 December 1998 were #3.6m on a turnover of #31.8m. The deal was financed in part by a share issue underwritten by BT Alex Brown which raised #66.6m. Sage will settle the balance with a cash payment to Peachtree’s parent, Automatic Data Processing.
Having won dominance in the UK market, Sage has spent the past few years replicating its success internationally, first in Europe and now in the US.
The Peachtree acquisition follows the purchase in March 1998 of State of the Art Software for around #170m. Paul Walker, chief executive of Sage, commented: ‘The integration of State of the Art has gone very well.
We believe that our skills in integrating acquisitions, together with our expertise in brand management and installed-base marketing will enable us to continue to develop Peachtree’s business.’
The challenge of maintaining its growing portfolio of accounting products comes a distant second to Sage’s aggressive strategy of growing its user base through acquisitions.
Having captured a new pool of customers, Sage said it would aim to boost revenues from support services.
The Windows-based Peachtree Office Accounting suite comes with an array of modules that cost as little as $29.95 each. Tate Bramald Consultancy managing director Jyoti Banerjee, a specialist accounting software analyst, said: ‘Sage has no track record of taking products from one country to another. Their philosophy is that it is not possible to do so.’ But he added: ‘The reality of R&D costs means eventually they’ll have to change their tune.’
The view from one UK reseller, who preferred to remain anonymous, was that it was a good buy, but could lead to friction in the US market. Only a few Peachtree users have a service deal with the software house, while in the UK 33% of customers take out a contract.
Sage’s service-oriented revenue model could mean it cuts off extra revenues for resellers. ‘The US is an untapped market for services but it has a potential impact on dealers who provide a lot of service work for clients,’ said the reseller.
Banerjee echoed this concern: ‘I’m not convinced you can simply adopt the UK model and take it abroad. Sage tends to have a better idea of how to run a software business than the companies it acquires, most of whom have a product focus. But the Sage magic doesn’t always work. In the UK, Multisoft disappeared off the scene and the company has had problems with resellers in Germany.’
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