MYOB buys fintech Flare, moving on after ‘semi-ignorant’ reaction to ANZ talks

Accounting software firm MYOB has beefed up its offerings by acquiring Flare, a Sydney-based fintech backed by investors such as former prime minister Malcolm Turnbull, for an undisclosed sum.

The deal comes two months after the company was in talks to be taken over itself by big four bank ANZ - a potential tie-up that had received “semi-ignorant” reactions from investors, according to MYOB’s chief executive.

The purchase will see Flare, an HR platform which provides companies onboarding, benefits and superannuation services, continue to operate as a standalone business, MYOB said in a statement on Tuesday morning. Both companies had already been working together since late 2020.

MYOB chief executive Greg Ellis said the purchase was taking his company “into the next level”.Credit: Eamon Gallagher

MYOB CEO Greg Ellis said this week’s deal was part of the company’s broader strategy to move beyond just being an accounting service and provide a more comprehensive business management platform for small and medium enterprises.

“I don’t think we can underestimate how significant that is, that’s really [...] taking us into the next level of value,” he said.

Ellis said there would be no operational changes at Flare, whose investors include Malcolm Turnbull, financial services industry leader David Fite as well as venture capital firms Point72 Ventures, Acorn Capital, Reinventure and Tank Stream Ventures. He would not say how much the deal was worth except to describe it as a “significant transaction”.

Flare co-founder James Windon said the deal was a good return for these investors and came at a “significant mark up on the last round valuation” of the firm, without giving any further details.

“We’re really happy with the outcome,” he said.

The acquisition comes after ANZ announced in mid-July that it was in talks to buy MYOB from its owner, global private equity giant Kohlberg Kravis Roberts & Co (KKR). The possible deal was met with widespread scepticism by the market.

Less than a week after ANZ confirmed the discussions, the lender announced it had bought Suncorp’s banking arm instead, and had walked away from talks with KKR.

Ellis told The Age and The Sydney Morning Herald said he believed ANZ was initially interested as management understood the significance of what MYOB could offer “within the financial services envelope - 2.8 million people being paid, $11 billion worth of gross payroll put through our system every month”.

“We can see the amount of money both in terms of short-term and long-term debt that our customers have, and obviously they’re a bank that’s interested in lending money,” he said.

“So I think the market reacted semi-ignorantly, frankly, around the synergies of this.

“As to why it didn’t proceed, ultimately, in conclusion, that’s a question you’d have to ask ANZ ... it’s public knowledge that they were also in discussions to buy the Suncorp assets. I think it’s not unreasonable to conclude that there was a bit of congestion at the ANZ level.”

Ellis said that the possibility of any future sale of MYOB was a matter for KKR.

“We’re owned by private equity. And as you know, with the private equity model, eventually they sell, but right now, we’re just focused on running the company. We’re not in discussions with ANZ or anybody else, we’re back to running the business.”

Flare co-founders Windon and Daniel Cohen, who will stay on at the fintech, said they were excited about the deal after their partnership with MYOB. Windon said the pair had confidence in MYOB, even if it was sold down the track.

“This is a private equity-held business, they care about growth, they care about the dynamic, they care about actually taking a business and making it ... bigger, better, faster, stronger,” he said. “The fact that they’re trying to grow quickly, and looking for us to grow quickly and independently, I think is what’s attractive.”

“MYOB has been owned by multiple people over the past 30 years, yet here it is, still to this day an iconic Australian company. It’s a company my Mum and Dad know.”

The co-founders said their research was showing that in both small and large businesses, employees were expecting more from their employers, particularly around flexibility and remote work, but also in terms of benefits and wellness initiatives in the workplace.

The tight labour market and the ensuing battle for talent has accelerated this trend, said Windon, providing a window for Flare to grow its business.

“That’s been a really big opportunity for us to step into.”

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