Adapting financial software to fit the vastly complex and diverse legislative frameworks and accountancy practices of international markets is expensive and time consuming. This is perhaps why Newcastle, UK-based Sage Group Plc does not attempt to do it. Instead, the company favors the approach of buying up domestic companies in chosen geographical markets and then continuing to sell that company’s products. It is a strategy which the company further developed in February with the purchase of PC and Windows NT-based accountancy software specialist State of the Art of Irvine, California (CI No 3,335). Sage paid $263m for the company, funded in part by a 75m pounds ($120m) placing of shares. Sage will be hoping to boost its presence in the US market, where it experienced an 8% decline in sales in 1997. As the largest player in the fragmented US market for small business accounting software, with a market share of between 5% and 10%, State of the Art will certainly boost Sage’s US revenues. With sales of $64m in its last financial year, the State of the Art acquisition means that almost a third (30%) of Sage’s revenues will now come from the US market, compared with just 11% previously. Under the terms of the deal, State of the Art will continue to operate as a separate entity and retain its management structure, but will report to Sage’s US headquarters in Dallas as part of the Sage US Group. The move was hailed by analysts as the harbinger of further consolidation among the larger middle-market application software companies. They are under pressure as giants such as SAP AG, PeopleSoft International Inc and Baan NV extend beyond the high-end sector.
Computer Business Review.
