Please wait ...

Sage enters Brazil with acquisition of Folhamatic Group

The Sage Group plc (”Sage”), announces it has acquired a controlling interest in Folhamatic Group (”Folhamatic”), a leading provider of accounting, tax and payroll and regulatory content software in Brazil. The expected total consideration of £125m (R$398m) for 75% of the equity equates to an enterprise value for 100% of the business, including estimated net debt at closing, of £191m (R$608m).

The acquisition of Folhamatic represents an important step in building Sage’s presence in key emerging markets, enabling a strategy focused on growth and a disciplined approach to returns. Folhamatic has a leading market position in a large and growing economy:

  • Brazil, now the sixth largest economy in the world, represents an attractive market for Sage with robust macro-economic fundamentals and a favourable, highly complex tax and regulatory environment
  • The SME market in Brazil is relatively immature with limited business software technology penetration with some 90% of the c.6 million Brazilian SMEs using no business software
  • Folhamatic is a leader in the SME market, with the leading presence in the accounting firm market (an important channel for SMEs), with c.13,000 accounting firms (out of c.78,000 in Brazil) and c.46,000 businesses as clients
  • Folhamatic has a subscription based revenue model with over 80% of revenue generated on a recurring basis
  • The acquisition of Folhamatic is highly complementary to Sage’s strategy and business model:
  • High growth business with underlying revenues in the twelve months to 31 December 2011 of £42.4m (R$135.4m) growing at over 13%
  • Integrated software and content offering, providing competitive advantage and potential for significant cross-sell opportunities
  • Scope to combine Sage technologies, products and best practice with Folhamatic customer base and customer solutions to drive further growth
  • The transaction achieves control for Sage while retaining and incentivising key Folhamatic personnel - the remaining 25% of equity will be retained by Mauricio Frizzarin, the founder and CEO of Folhamatic and is subject to a put and call arrangement exercisable during 2015

The transaction is consistent with Sage’s M&A strategy:

  • Acquiring a market leader in new high growth geography, focused on core SME accounting customers
  • Folhamatic is valued at 13.4x projected 2012 EBITDA
  • The transaction is immediately earnings accretive. Return on capital is expected to meet Sage’s risk-adjusted hurdle rate in the third year post acquisition

Sage reiterates its commitment to an efficient balance sheet structure as set out at its interim results presentation on 9 May 2012. To this end, the ongoing share buyback programme will continue following the acquisition of Folhamatic.

Commenting on the acquisition, Guy Berruyer, CEO of Sage, said:

“We are delighted to announce the acquisition of a controlling interest in Folhamatic. It provides us with a market leading position in the large and rapidly growing Brazilian market. We are excited about the growth opportunity that the combination of Sage and Folhamatic creates in this market. Folhamatic is an outstanding business, with strong management, and we are delighted to welcome the management and staff to the Group. We are particularly pleased that Mauricio Frizzarin will continue to run the Folhamatic business, which builds on our track record of retaining the top entrepreneurial talent of businesses we acquire to drive value for our shareholders.”


The Sage Group plc +44 (0) 191 294 3068
Guy Berruyer, Chief Executive Officer
Paul Harrison, Chief Financial Officer
Murdo Montgomery, Investor Relations

Tulchan Communications +44 (0) 20 7353 4200
David Shriver
Lucy Legh

Transaction details

The total consideration for 75% of the equity is payable in two parts and is contingent on the performance in 2012. An initial payment of £101m (R$322m) is payable in cash on completion, with the potential for a further payment, expected to be £24m (R$76m) to be paid in addition if performance targets for the year ending 31 December 2012 are met1. The transaction is subject to certain completion deliverables and is expected to complete in June 2012. The consideration is being funded out of Sage’s existing cash reserves and banking facilities. Put and call arrangements, exercisable by either party in a set period during 2015 and based on the financial performance of Folhamatic in the year ending 31 December 2014, have been agreed over the 25% remaining shareholding of Mauricio Frizzarin.

The acquisition is being made by an indirect subsidiary of The Sage Group plc, W.Y.L.S.P.E. Empreendimentos e Participações Ltda., through a purchase of direct and indirect interests in Folhamatic Tecnologia em Sistemas S.A., the holding company of Folhamatic, from sellers Fund VII FIP - Fundo de Investimento em Participações, Gilberto Caiuby Fischel, Rony Blinder and Mauricio Frizzarin. Funds managed by Insight Venture Partners are major shareholders of Folhamatic.

Sage was advised on the acquisition of Folhamatic by Citigroup Global Markets Limited.

About Folhamatic

The Folhamatic Group serves c.13,000 accounting firms (out of c.78,000 in Brazil) and c.46,000 SMEs. Its software and services provide accounting, tax and payroll software to accounting firms and businesses complemented by the provision of integrated regulatory content and training services. In the highly complex Brazilian tax and regulatory environment, Folhamatic’s products and services help businesses and accounting practices achieve legal, fiscal and regulatory compliance. The integration of software and content provides an important competitive advantage and allows for significant cross-sell opportunities. This is provided on a subscription basis with over 80% of revenue generated on a recurring basis.

Folhamatic revenues for the year ended 31 December 2011 were £42.4m (R$135.4m), EBITDA was £6.8m (R$21.7m) and EBITA was £6.5m (R$20.7m). Gross assets as at 31 December 2011 were £79.2m (R$252.8m). Underlying revenues in the twelve months ended 31 December 2011 grew at 13%. In the year ending 31 December 2012, the business expects to deliver revenue of £48.8m (R$155.8m), EBITDA of £14.2m (R$45.2m) and EBITA of £13.9m (R$44.3m).

About Sage

The Sage Group plc is the leading global supplier of business management solutions to small and medium-sized enterprises (”SMEs”). Formed in 1981, Sage was floated on the London Stock Exchange in 1989. Sage has over 6 million customers and more than 12,600 employees worldwide. We operate in over 24 countries covering the UK, mainland Europe, North America, South Africa, Australia and India. For further information please visit

1 For the purposes of the UK Listing Rules, both the initial transaction and the exercise of the put and call option are subject to a capped consideration. The cap for the initial transaction limits the consideration payable for the 75% stake to £239m (R$763m). This would only be payable if Folhamatic outperformed the 2012 EBITDA forecast by 100%. Consideration payable by Sage for the remaining 25% stake if the put or call option is exercised equals 25% of 13.3x Folhamatic EBITDA for the year ended 31 December 2014.

* All financial information calculated on the basis of £1 = R$ 3.19