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Business management solution provider MYOB has announced it will no longer pursue the acquisition of Reckon to instead focus on its planned investment strategy.
Citing significant delays, the result of extensive regulatory requirements, MYOB has announced it will terminate the acquisition of Reckon's Accountant Group assets.
MYOB says the sale and purchase agreement stipulated a six month period prior to completion, within which certain conditions had to be satisfied.
As the conditions were not met and the parties could not agree on terms, MYOB will no longer continue with the planned acquisition of Reckon.
"While the rationale for the acquisition remains unchanged, the further potential delays in the ACCC and 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," says MYOB in a release to the ASX on Thursday morning.
Instead, the company says it will focus on accelerating investment to further strengthen its existing market position.
The company will focus on accelerating organic investment in order to capture further share in a rapidly growing market. The company now expects to reach 1 million online subscribers on its platform by 2020.
"MYOB is confident that it can achieve this outcome organically; and that accelerating the development of the MYOB Platform, together with additional sales and marketing investment, further increases this confidence," says MYOB.
The company also says it remains committed to its share buy-back program, which was announced in August 2017.
MYOB CEO Tim Reed says the company expects to remain financially solid despite the acquisition falling through.
"With the Reckon deal no longer proceeding, we plan to accelerate the pace of our share buyback program, and thereby maximise the return to our shareholders," says Reed.
"We are confident that throughout this period of investment our business will remain highly profitable, with underlying EBITDA margins expected to be above 40 per cent."
The group plans to invest $50 million in R&D over the next two years. This significant investment will, according to MYOB, bring new online Adviser and SME solutions to the market faster. The company is also investing $30 million into sales and marketing to increase the rate of referrals from the adviser base of accountants and bookkeepers.
The company has also updated its 2018 guidance following the termination of the Reckon acquisition and the new investment plans. The group now expects organic revenue growth to be in the 8-10 per cent range, with underlying earnings margins to be in the 42-44 per cent range.
Shares in MYOB are down 3.10 per cent to $2.96 per share at 10.51am AEST.
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