In a story that appears to have an intriguing sub-plot, Newcastle-based accountancy software house Sage Group Plc is to acquire DacEasy Inc, an accountancy software house based in Dallas, Texas for UKP9.5m in the company’s first acquisition since it went public. One theme that was repeated ad nauseam at the announcement of the acquisition was that the two companies are mirror images of each other. They are both companies driven by marketing and have low research and development budgets – both derive 35% of turnover from recurring revenues such as stationery, and both have a high profile in low-end accountancy software packages, Sage in the UK, DacEasy in the US. Furthermore, there appears to be little will to integrate the two companies – DacEasy will continue in the US, Sage in the UK. So far so good, but then both companies go on to explain that Sage will also continue in the US and DacEasy will continue to attempt greater penetration in the UK, both compete in Australia, and DacEasy will be left the rest of the world to play in. In other words, the acquisition of the US company DacEasy is being used by Sage to penetrate the continental market, but there appears to be some crossover in the respective home markets.
High street distributors
In the US, DacEasy makes 80% of its sales to US retail sectors through high street distributors such as Egghead Discount Software Inc. Sage wants DacEasy to promote its MainLan network starter kit product range via these distribution channels at traditional accountancy markets. Meanwhile, Florida-based US Sage will continue to sell MainLan to specialist outlets. Sage’s higher-value modular accounting packages known as Sovereign will be marketed under the DacEasy name, while DacEasy takes up the Sage fourth generation language used in the development of Sovereign to develop an international modular accountancy package. At this point it all gets hazy – will these products supersede Sovereign, and once DacEasy is established as a European accountancy package where does that leave Sage’s UK market? Could it leave Sage as purely a network hardware vendor? Such speculation aside, Sage chairman Dave Goldman sees the acquisition of DacEasy as a unique opportunity, it being, he says, the only US accountancy package company he would want to buy. DacEasy is six years old and was acquired in 1987 by the conglomerate Insilco, which is currently trading under Chapter 11 bankruptcy protection. In the year ended December 31 1990 DacEasy reported pre-tax profits down 21% at $2.2m on turnover flat at $15m. Sales and profits were affected over 1989 and 1990 by problems with DacEasy v.4.0, which was announced, suffered a delayed launch, was then withdrawn from the market because of bugs and then relaunched. Sage stresses that it has proceeded with due diligence and that the DacEasy brand name has not suffered from these product shortcomings. Sage is buying 95% of DacEasy with its founder and president, Kevin Howe retaining the other 5%. Howe and his financial officer Lee Jones will join the Sage board. The DacEasy shares will be held by a new US company Sage US Holdings. Sage is paying for DacEasy via UKP3.5m from cash reserves and UKP6m to be raised through a rights issue, underwritten by Schroders, of one for five at 200 pence compared with a Monday closing price of 263 pence.
