Sage Group has announced the sale of its US-based payroll outsourcing business for £78 million. The North East software giant is set to dispose of its Sage Payroll Solutions division to iSolved, a portfolio company of private equity firm Accel-KKR and a provider of human capital management solutions.
This strategic move aligns with Sage’s focus on driving growth within its cloud-native products. Despite the strong brand and market position of the US Payroll Outsourcing team, it did not have a clear route to Sage Business Cloud, leading Sage to choose this route to create value for its shareholders.
Details of the Transaction
Sage Group has confirmed the sale of its US-based payroll outsourcing business, Sage Payroll Solutions, to iSolved for £78 million. iSolved, a company known for its human capital management solutions, is part of the private equity firm Accel-KKR’s portfolio. This transaction is expected to result in a statutory profit of approximately £23 million for Sage upon completion.
For the year ending 30 September 2018, Sage Payroll Solutions reported revenue of £38 million and an operating loss of £1 million. This sale is seen as a strategic decision to streamline Sage’s operations and focus on its core cloud-based offerings.
Strategic Alignment
A spokesperson for Sage stated, “We are focused on driving growth within our cloud native products, and products which have a clear path to Sage Business Cloud.” This highlights the company’s intent to concentrate on areas with the most growth potential.
The US Payroll Outsourcing division, while having a strong brand and market position, did not align with Sage’s strategic direction towards cloud solutions. Therefore, the decision to sell was made to create more value for shareholders.
Financial Performance
Sage reported an overall revenue of £1.85 billion for the year ending 30 September 2018, marking an increase of 7.6% from the previous year.
The company has been focusing on increasing its revenue through strategic decisions such as the sale of non-core business units, reflecting its commitment to enhancing shareholder value and adapting to market demands.
With the sale, Sage expects to strengthen its financial position and reinvest in key areas aligned with its cloud-first strategy.
Leadership Changes
In a bid to further drive its strategic initiatives, Sage appointed a new chief financial officer in December, following the appointment of a new CEO in November.
These leadership changes signal Sage’s commitment to revitalising its management team to better tackle the challenges and opportunities in the evolving software landscape.
This move is expected to enhance Sage’s ability to execute its strategy more effectively, building on the strong market position and reputation it holds in the software industry.
Market Position
Sage’s strategic move to sell its US payroll business underscores its commitment to focusing on its core competencies, particularly its cloud-native solutions.
By divesting non-essential units, Sage aims to streamline its operations, thereby enhancing its ability to innovate and maintain a competitive edge in the market.
This transaction with iSolved is indicative of Sage’s broader strategy to remain agile and responsive to market opportunities, ensuring sustained growth and profitability.
Future Prospects
Looking forward, Sage is expected to continue its focus on cloud-native products, reinforcing its commitment to innovation and customer satisfaction.
The proceeds from the sale will likely be reinvested into areas with potential for high growth, particularly those aligned with the Sage Business Cloud framework.
This strategic divestment is poised to bolster Sage’s financial health, providing the company with the resources to invest in future opportunities and maintain its market leadership.
Conclusion
Sage Group’s decision to sell its US payroll outsourcing business for £78 million is a significant step towards realigning its strategic focus.
This move not only strengthens Sage’s financial position but also underlines its commitment to enhancing shareholder value through targeted investments in cloud-native solutions.
Sage Group’s strategic divestment of its US payroll outsourcing business is a calculated move aimed at bolstering its focus on core cloud solutions. By aligning its portfolio with future growth areas, Sage is positioning itself for sustained success and market leadership.
The transaction is expected to result in a substantial profit, which will be reinvested in cloud-native products, ensuring that Sage continues to innovate and meet the evolving needs of its customers.