Accounting software house Sage has stepped up its 1999 shopping spree by acquiring two UK software companies, Tetra and Taxsoft.
Last Thursday, Sage bought Wimbledon-based taxation specialist Taxsoft for #10.8m in cash. It then followed that deal on Monday with a #78m bid for Birmingham-based ERP supplier Tetra, gazumping last month’s offer from Lynx Group.
‘We have a strong cashflow in the Sage business and put together a half-cash, half-share offer,’ said Sage chairman Paul Walker. ‘It was very attractive to Tetra’s original founders.’
Tetra’s financial advisers contacted Sage just as the company was looking to boost its mid-range software portfolio. The company has been under pressure from customers and resellers to move upmarket.
Although Sage acquired US mid-range developer State of the Art last year, it needed to take on a UK-based developer to establish the necessary infrastructure.
Tetra’s C/S3 range links financial modules with a wide range of manufacturing and logistics modules. The company has 9,000 customers and a network of 35 resellers, many of which write their own specialist add-ons for ERP software.
Peter Suffolk, managing director of Leicester-based Infonote, was surprised by the Tetra acquisition. ‘Because they’ve already got the State of the Art product, where will Tetra fit in?’ he asked. ‘They’ll have a conflicting message for customers.’
The decision to buy Taxsoft was more straightforward. Adding one of the leading players in the UK taxation market to its recent accounts preparation and forecasting acquisitions has filled out the company’s product portfolio.
Taxsoft also brings large corporate clients like ASDA, Pilkington’s and KPMG into the Sage fold.
BDO Stoy Hayward tax partner Mark Lee said Tax-soft was a natural fit for Sage. But he added: ‘I just hope Sage’s influence will mean Taxsoft irons out all the little bugs faster.’
Sage professional accountants division director Gavin May said: ‘It will provide ample opportunities for us to cross-sell our products.’
Many software analysts have voiced concerns about the wisdom of Sage’s magpie-like growth strategy. But Walker said: ‘They don’t realise we meet local business requirements. Our operating margins are higher than any other software business.’
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