Panmure underwhelmed with Sage's latest deal

21st Jul 2014 13:28

Panmure Gordon has said that its enthusiasm about Sage's purchase of a majority stake in Exact Software Deutschland "doesn't dazzle" as it kept a 'hold' rating on the accountancy software group.Sages said it is paying €16.25m for the German payroll business of Exact Holding to increase its payroll revenue to approximately €30m."It is nice to see Sage come back to M&A in a deal that increases its payroll customer base and provides opportunity to drive growth through an enlarged customer base. But in truth our enthusiasm is muted," Panmure said."This cheap acquisition, 1.55 times historic sales, likely reflects that the broader HCM market is an early adopter of cloud, and Sage is buying an old-school on premise solution. Sage should have been bolder and looked to acquire one of this markets disruptors like Acrede."The broker said that Sage's third-quarter update on Tuesday "should be of the 'all is well' variety", though it expressed concerns with the company's longer-term strategy after Chief Executive Guy Berruyer announced his resignation in May.Panmure maintained its 407p target price for the shares, which were more or less flat at 378.3p by 13:14 on Monday.BC