I note that Intuit has decided to sell off a small division (2% of group turnover) with fairly low operating margins compared to the rest of the business. I think that they have received a good price for this asset, at >30x operating profit, and 1.7 x revenues.
I am sure that this signals a trend that we will see as the larger tech players continue to react to the changing macro environment and give more focus to the core and successful parts of the business.
It also sends an important message to the rest of the group divisions - "start making the grade from a operating point of view, or you may find yourself with new owners." I think that this is a great way to motivate people to the key parameters that drive their business, whether that be revenue growth or focus on the bottom line (or indeed both).
To the best of my knowledge Sage has acquired well over 100 companies but has never divested anything of size.
I wonder if there are hiddne pieces of the business that could be considered as non-core, either from the perspective of operating metrics and margins, or indeed products that are not contributing to growth. The other area that could be interesting to look at for divesting might be operating divisions in non-core geographies.
Until Sage takes the decision to divest something, everyone at Sage will continue to live under the impression that being acquired by Sage means you are getting into a family that you can stay with until you retire. Maybe its time to look at that again. This does not mean that Sage is anything but a well run company, nor does it mean that they can't continue with the traditional acquisition model. I would see this as a sign of strength and maturity rather than perceived weakness!
Given the pricing that Intuit has received in this deal it would be interesting to see whether Sage could increase shareholder value by identifying and then divesting some non-core assets out of the business.
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