Failed MYOB/Reckon Merger Offers Opportunity For Accounting Startup Karbon

Australian small business (SMB) accounting software startup Karbon sees opportunity in the failed merger of industry leaders MYOB and Reckon, according to The Australian Financial Review (AFR) reports Monday (June 18).

Karbon announced a $5.19 million fundraising led by Blackbird Ventures, and with the funds, the company said it plans to take advantage of market disruption caused by the Australian Competition and Consumer Commission‘s (ACCC) blocking of the MYOB/Reckon deal.

Karbon Co-founder Stuart McLeod said in an interview with the publication,”The consensus is that Reckon [doesn’t] have the funds to invest in maintenance of their APS [Accounting Practice Software] product, and that their customers will go into a buying cycle over the next 18 months to three years.”

That buying cycle could offer smaller industry competitors a chance to secure new clients. While Karbon is based in San Francisco (and most of its revenue is from U.S. accounting companies), the firm said about half of its 20 staff members are based in Sydney, and 35 percent of revenues come from Australia. Reports said Karbon is also looking at MYOB’s practice management customers, following its poaching of former MYOB sales executive Richard Snell, who will lead Karbon’s Asia Pacific business development.

MYOB leads Australia’s SMB accounting software market and, late last year, announced plans to acquire industry rival Reckon for about $133.5 million. However, MYOB pulled out of the deal late last month after the ACCC issued a statement expressing concerns over the merger. The ACCC was slated to vote on the deal by June 21. MYOB’s decision to back down from the takeover caused shares to slide more than 5.6 percent.

“We went into this confident that it would not diminish competition,” said MYOB chief executive Tim Reed in an interview with the AFR. “We have pursed this for the whole six months and done everything we could to get all the conditions completed. We had teams working on this right up until [the] announcements [by the ACCC].”