At the heart of ANZ’s rumoured takeover of accounting software company MYOB is the customers. The business customers that bring potential cross-selling opportunities into ANZ’s primary services is the underlying motive for the talks because businesses spend a hell of a lot more dough on their banking services than they do their accounting software. 

So how much are business customers worth to a bank?

Media and broker reports suggest ANZ’s takeover bid will be in the vicinity of $4.5 billion which is almost double the $2.4 billion paid by KKR in 2019 when the private equity firm took MYOB off the ASX boards. 

At present, MYOB has approximately 1 million customers that range from small businesses all the way up to multinationals. That loosely values each customer at $4,500 for simple valuation purposes. 

While the majority of those customers will use other banks for the banking services, a takeover would invariably see ANZ own the cash flow data of those businesses, providing valuable insight into their needs for certain banking products, such as loans, credit cards and merchant services. 

On face value, $4,500 per customer really doesn’t sound like much when MYOB is a hugely profitable business on its own. In its final year trading as a listed company in 2019, MYOB reported $445m in revenue and $64m in statutory net profit after tax. 

So at $4,500 per customer, is MYOB a good business for a bank to be acquiring? If so, the team at fellow accounting software business Reckon (ASX: RKN) will be doing a merry jig given they have more than 114,000 customers while trading with a $141m market cap. 

That market valuation of Reckon includes their $100m asset sale of subsidiary business APMG which has been approved by regulators and will settle next month. Critically, the sale of that business has no impact on their core cloud-based software business or their 114,000 SME customers. 

From that $100m, Reckon is expected to clear its balance sheet of all debt to leave a conservative $50m to be returned to shareholders as a special dividend. 

Assuming all of that takes place uninterrupted, it would value Reckon’s primary software business at $90m, or in MYOB valuation terms – $877 per customer. Like MYOB, Reckon too is very much profitable having delivered $7.9m and $7.4m net profit after tax in FY21 and FY20, driven by their customer growth coming in at 12% per annum. 

Based on that loose valuation of their business, one has to wonder how undervalued Reckon might be on the open market when banks could land customer leads at an 80% discount to ANZ acquiring them from MYOB. 

While there is still a bit to play out in the MYOB deal, including ANZ raising the funds to consummate the acquisition, there might be a wry smile peeping through the window at Novatti Group (ASX: NOV) headquarters with the digital payments company having acquired a 19.9% stake in Reckon last year, 12 month before ANZ saw the opportunity in MYOB. 

Since then, Reckon and Novatti (which has a banking licence application currently under review) have already partnered on merchant services under a profit-share agreement while Reckon has flagged plans to enter business banking and business loans in the near future. Take a guess who they’d likely do so with.