MYOB has decided to drop its bid to acquire Reckon’s accounting unit due to the ACCC’s extended regulatory review of the tie-up.
The company announced the plan to shutter the deal Thursday, saying it had six months to complete the deal, including winning any necessary regulatory approvals, under the sale and purchase agreement and that the parties could not agree to terms to extend the contract.
“The regulatory process has taken considerably longer than the parties anticipated and could continue for some time,” MYOB said.
“While the rationale for the acquisition remains unchanged, the further potential delays in the ACCC and the NZCC process has created uncertainty in the business to be acquired with the potential to impact on its trading, and the parties could not agree to mutually acceptable terms to extend the contract,” MYOB said.
The ACCC said in April it had delayed it decision on MYOB’s proposed bid for Reckon’s assets while it waited for information, after it raised concerns about how the merger would affect competition in the accounting software market. The New Zealand Commerce Commission was also reviewing the deal for competition concerns.
A spokesperson for the ACCC said the regulator discontinued its review this morning.
“Merger reviews conducted by the ACCC are conducted as quickly as possible. The time required to reach a final view is affected by the complexity of the matter and the issues raised,” the ACCC spokesperson said.
An announcement on the deal was originally expected May 30. On April 9, the regulator said it had requested further information from market participants, MYOB and Reckon.
In a statement of issues released in March, the ACCC said it the deal went forward, MYOB would likely be the only company that supplies software for medium to large accounting firms.
“If MYOB has a monopoly on this software, it would substantially lessen competition. We think there’s a significant risk for customers that prices will increase and service levels will decrease,” ACCC Commissioner Roger Featherston said.
“The ACCC received feedback from the accounting industry that MYOB’s AE product and Reckon’s APS product are the only products that are capable of meeting the software needs of medium to large accounting firms,” Featherston said.
While there are other suppliers, market feedback provided to the ACCC showed they were not sophisticated enough to meet the needs of medium to large accounting firms.
“We also identified several barriers to expansion for other competitors. These include the time and cost to develop better functionality, switching costs for accounting firms, and a cautious approach from the industry towards changing to untested suppliers,” Featherston said.
The consumer regulator was reviewing MYOB’s $180 million bid for Reckon for competition concerns. Both ASX-listed companies provide software accounting solutions to businesses. In announcing the review, the ACCC said it would seek feedback on “practice management software, including client accounting and tax compliance software, for accounting practices.”
The ACCC sought market feedback on how prices for accounting practices, alternative software providers, and new entrants to the market would fare if it signed off on the deal.
MYOB proposed to acquire three Reckon businesses – Reckon APS, Reckon Elite, and Reckon Docs – including all of its clients, IP, systems and employees.
In announcing the deal in November, MYOB CEO Tim Reed touted how the acquisition would expand its reach, saying it would “deepen our relationship with more than 3,000 accounting practices”.
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