Plans by the private equity owners of MYOB to acquire its smaller rival, the South Africa-based GreatSoft, has raised warning bells for Australia's competition watchdog.
The Australian Competition and Consumer Commission (ACCC) says despite GreatSoft being a relative newcomer to the Australian market, the preference by accountants to transition to cloud-based services was enough to cause concern that such a takeover could lessen competition in the accounting software market.
MYOB, which delisted from the ASX in 2019 after being acquired by private equity firm Kohlberg Kravis Roberts, supplies practice management software to medium-to-large accounting firms in competition with GreatSoft, Reckon APS and Xero Practice Manager.
"We are concerned that if MYOB acquired GreatSoft, there would only be three major suppliers of practice management software to medium-to-large accounting firms," says ACCC Commissioner Stephen Ridgeway.
"GreatSoft is a new entrant that has won several medium-to-large MYOB customers, and we are looking into its potential to grow stronger."
Ridgeway says the accounting industry is increasingly moving from desktop-based accounting software systems such as MYOB to cloud-based systems.
"While GreatSoft's customer base is currently small, the ACCC is investigating its potential to become a strong competitor as it appears to be a viable choice for many medium-to-large firms wishing to migrate to the cloud."
The ACCC says new competitors in the field of accounting software require significant resources and time to penetrate the market, making competition already difficult to get off the ground.
"While GreatSoft itself faced some of these challenges, we consider that as it has operated in Australia for the past two years, it may now be well placed to overcome them," Ridgeway says.
GreatSoft moved into the Australian market in 2018, although it didn't officially launch until the end of 2019.
The company supplies a cloud-based practice management module and integrates with a range of third-party software suppliers for other accounting modules, including Xero for Xero Tax.
The ACCC is inviting submissions from interested parties in relation to the buyout proposal with a final decision expected to be made on 22 April 2021.
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