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Sage expands cloud portfolio with Brightpearl deal

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Cloud software developer Brightpearl has become the latest subsidiary in the Sage empire.

22nd Dec 2021
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Launched in 2007 as an “end-to-end” suite of web applications including CRM, accounting and stock management, Bristol-based Brightpearl has built a viable mid-market foothold in both the UK and the US.

The £225m deal to acquire 83% of Brightpearl follows a £20m investment at this time last year, when Sage took a minority stake and a seat on the Brightpearl board.

Subject to US regulatory approval, the full acquisition is expected to complete in January 2022.   

Pandemic growth

Brightpearl has clearly been enjoying some success in retail and e-commerce markets during the pandemic. For the year ending December 2021, Brightpearl is projected to earn £20m, up around 50% on last year, and is poised break even. 

Back in 2018, AccountingWEB member mg200 said Brightpearl was created to solve problems that Sage and other programs could not deliver: “All your orders automate into [Brightpearl], your warehouse staff can receive inventory on POs and fulfil the sales orders – so your stock and margin are accounted for in real time.

“Your sales orders are automatically invoiced and your customer card/PayPal receipts are applied automatically.”

Product alignment

Sage’s growing involvement with Brightpearl over the last year confirms an increased focus on mid-market accounting under chief executive Steve Hare, but raises questions about potential overlaps with Sage Intacct, the US-developed ERP suite that has become its cloud flagship product.

Brightpearl appears to occupy an SME retail niche a little below the segment covered by Intacct and will broaden its value proposition for mid-sized businesses, according to Hare.

“Together, Sage and Brightpearl will remove the barriers that hold back retailers and wholesalers, streamlining their systems and enabling them to focus on growth,” he said.

Among the shareholders to benefit from Sage’s move are venture capitalists Cipio Partners, Notion Capital and Verdane, which all participated in last year’s funding round.

Positive response

After the acquisition was announced on Monday, Sage’s share price enjoyed a 10-point surge as investors welcomed the move. This follows a sluggish period on the FTSE index since mid-November when the listed software giant announced a 3% dip in turnover for the year to 30 September to £1,846m.

Operating profit and margins were both down for the year, but Hare pointed to improving EBITDA and organic revenues. The good news was fuelled partly by 19% growth in Sage Business Cloud subscription fees to £997m and in solutions for mid-sized businesses, particularly Sage Intacct.

Acquiring Brightpearl’s additional user base, revenue and potential profits should help Sage boost the momentum of its cloud transition in the years ahead.

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