Perhaps you’ve heard and had a bit of time to absorb the information, or you don’t entirely care or not sure what it’s about, but last week Sage made its largest acquisition in quite some time in buying cloud accounting and financial management software company Intacct. I’d like to take this time to share my thoughts on what it means, or could mean, for you and your clients.
Just to be clear, this is all just my perspective; there’s other viewpoints out there, but I feel it prudent to offer my comments on the matter.
To recap, and according to its own press release on July 25, UK-based Sage Group agreed to purchase Intacct for $850 million. Intacct has a three-year revenue CAGR in excess of 33 percent, with current annualized recurring revenues of $96 million, over 90 percent of which is subscription based.
Intacct was also recently named a Visionary by Gartner in its inaugural Magic Quadrant for Cloud Financial Management Suites for Mid-Size, Large and Global Enterprises (June 2017). Also announced, Intacct’s CEO, Robert Reid, will remain to run the business unit, which will be known as Sage Intacct (not to be confused in any way with Sage Impact). The transaction is expected to be completed within weeks, subject to customary completion conditions.
So what does this mean and why should you care? Well, in all honesty, unless you have mid-market clients with inventory needs, revenue recognition concerns (software/tech, etc.), or you provide or have aspirations in business process outsourcing or virtual CFO work, it’s probably not that big of a deal to you.
For those of you who are in the category I just described, or are just curious, here’s my two cents on the whole deal. If you know me (or not), I’ve had the pleasure of overseeing events in the US accounting space for the better part of 15 years. My main focus, and passion, has always been business technology and accounting in particular, so it’s safe to say in that time I’ve seen my fair share of comings and goings, growth and failures, and yes, Sage acquisitions.
Sage made its biggest splash in the US in the early 2000s by purchasing two major accounting software concerns: Best Software and Accpac. Many of those products still exist today under eponymous titles with corresponding numbers. Point being, Sage has a strong history of growth through acquisition and not as much through organic means.
Sure, recently that has changed with products such as Sage Live and Sage One, which happened to be true cloud products and not hosted as with Sage 50c, Sage 100c, and so forth. In mid-market accounting, cloud has eluded Sage in that it never built a cloud financial product like NetSuite, Intacct, Financial Force, and to a lesser degree Acumatica and AccountingSuite. And, obviously until recently, Sage had not made such a purchase in the market.
So, at its most basic level, Sage now has that mid-market/ERP cloud product to offer. Exactly how it will integrate it and the reseller/partner channel that comes along with the Intacct purchase is anyone’s guess right now. On that note, another thing this buy does bring to the table is Intacct’s accounting firm partners, who largely consist of Top 200 firms – many of whom have robust technology consulting practices.
Sage has long professed its commitment to accounting firms and had even started its own network, not necessarily of resellers or tech consultants, but partner firms in their own right who could advocate for Sage products. That number, again, has notably increased with this purchase.
As for Intacct, I can’t not see this as a win. I got to know them 15 years ago when I started covering the space, and to their credit they were able to grow steadily in an area that really has only recently been embraced, or at least largely accepted, by accountants ... that being “the cloud.” This is by no means an insult, just an observation by a long-time observer, but it always seemed Intacct was in the shadow of NetSuite, and I know for a fact they often competed in deals and not always on the winning side. Still, the Intacct channel grew strong and committed and their customer base loyal.
Maybe it wasn’t a product for every business, but hey what is? Also, what always seemed to elude them was global scale. With Sage’s global presence, they now have that in a bigger way than they ever did.
Also, having CPA.com, the product and service marketing arm of the AICPA, aided Intacct’s cause in the accounting space. The company was one of the earliest partners signed on by CPA.com (then CPA2Biz) and in a way became their poster child for the outsourced accounting/virtual CFO model they had promoted.
For the record, I had reached out to CPA.com for comment on the acquisition and the future of their relationship with Intacct, but no comment was issued, as of yet. I suspect there will be one coming.
Another note about this deal, about six years ago when I sat down with Intacct’s CEO at one of their annual partner events to discuss their future, he in no uncertain terms saw them as a public company and had plans to be there within 18 months at the time. His words.
But the market is what it is and going there just never happened. And, I also know on good authority that acquisition offers had come their way (not entirely certain by whom but the field is pretty small) and were turned down at the time.
So that’s the basic history as I’ve seen it. Big questions remain on brand, customer, and channel integration. Also, will Intacct retain some brand integrity? How exactly will Sage leverage the newly acquired accounting firms loyal to Intacct? How will Sage differentiate it from what they are doing with Sage Live, and even its own mid-market ERP products and associated channel?
I’d say at this point, stay tuned on all fronts as I’m certain there's lots more to be said.