The Sage Group Plc, the UK-based accounting software company has strengthened its position in the US market with the $145m acquisition of Peachtree Software Inc – only a few weeks before the Atlanta, Florida-based company was due for a $140m IPO. Now Sage, which has built a huge base in Europe through acquisitions, is set for a head-on battle in the US with market leader Intuit Inc. Sage broke into the US in January 1998 with the $263m purchase of Irvine California-based State Of The Art Inc, a company that offers packages aimed at the middle of the market. The all-cash deal with PeachtreeÆs owners, New Jersey-based computer services company, Automatic Data Processing Inc, gives Sage an important base in the small business market where PeachtreeÆs package has one million users. Sage based its strategy in Europe on acquiring companies offering entry level products – thus guaranteeing a future source of growth through the sale of upgrades. Sage boasts that it can leverage PeachtreeÆs strong presence in the entry level market to generate significant revenue growth. Following the example of its approach in Europe, it plans to improve the proportion of PeachtreeÆs revenues from sales of support services. Peachtree has been growing rapidly – adding 500,000 of its 1 million users in the past two years – and hoisted revenues last year by 11.9% to $52.5m. Apart from Intuit, Peachtree sees its main competitors as Computer Associates International Inc subsidiary ACCPAC International Inc, Clarus Corp, Great Plains Software Inc, Platinum Software Corp and Solomon Software Inc. The market is fragmented, and SageÆs Peachtree purchase may spark off a bout of consolidation. IDC estimates that the world market for accounting software will grow from $1bn in 1987 to $1.7bn in 2002. Sage, which will raise part of the money for the purchase by a 65m pound share placing, reckons the acquisition will have a neutral effect on earnings in the current financial year and be enhancing thereafter.
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