MYOB's $180 million Reckon acquisition at risk as regulator steps in

The Australian Competition & Consumer Commission has expressed concerns that MYOB's proposed $180 million acquisition of Sydney-based accounting practice management software firm Reckon would substantially lessen competition.

The consumer watchdog commenced an investigation into the potential acquisition in January, focusing on the impact it would have on medium to large customers.

If the deal goes ahead, Reckon will sell its APS, Elite and Docs businesses to MYOB along with 120 staff, while retaining its business and legal practice management divisions.

ACCC commissioner Roger Featherston said that if the acquisition goes through, MYOB would likely be the only practice software supplier that's suitable for medium to large accounting firms.

"If MYOB has a monopoly on this software, it would substantially lessen competition. We think there's a significant risk for customers that prices will increase and service levels will decrease," he said.

Based on feedback from interested parties, the ACCC said that MYOB's AE product and Reckon's APS products were the only products capable of meeting the requirements of medium to large accounting firms, including advanced software features like flexibility in reporting and workflow and customer management, advanced security configurations and the ability to support many concurrent users.

“There are other suppliers of this software but market feedback suggests those products are less sophisticated, and that they are unlikely to be able to develop the more advanced functionality for several years at least,” Featherston said.

“We also identified several barriers to expansion for other competitors. These include the time and cost to develop better functionality, switching costs for accounting firms, and a cautious approach from the industry towards changing to untested suppliers.”

As a result of the concerns, the ACCC has extended its review until 13 April, with a final decision to be made on 30 May.

Commenting on the review, MYOB chief executive Tim Reed said: "We understand that the extension by the ACCC is a standard part of their assessment process and we will continue to work with each of the regulators to enable them to complete their due diligence and provide an outcome."