Sage Acquires Verus Financial Management, Inc.

Industry sources report that Verus has the highest organic growth among the private merchants acquirers with over 100,000 merchant clients doing about $10 billion in annual merchant payment volume. Sage says it will "enhance the value of Verus' services by integrating them with Sage accounting software." The San Francisco-based investment banking firm FT Partners served as exclusive strategic and financial advisor to Verus and its Board of Directors in the transaction.

Verus is a merchant services business specializing in credit card and check processing for small and medium-sized businesses ("SMBs") based in Nashville, Tennessee. The acquisition is expected to complete within the next month, subject to regulatory approvals.

Verus is a leading provider of merchant services in North America. Merchant services support retail, business to business and e-commerce businesses in processing customer transactions through credit cards, debit cards and checks. Verus has a customer base of 101,000 small and medium-sized merchants in the U.S., including retailers, gas stations, restaurants, property managers and automotive dealerships. Verus revenues come from service fees linked to processed sales transactions.

Payment processing services are becoming an increasingly important business process requirement for small and medium-sized businesses, not only in managing payments to employees through payroll services, but also in managing transactions with customers through merchant services like those provided by Verus. The market for merchant services is growing strongly, underpinned by growth in the U.S. retail sector, wider adoption of e-commerce by customers and increased use of credit and debit cards. Verus will form the core of Sage's North American Merchant Services Division, complementing Sage's existing North American Payroll Services.

Verus has grown rapidly organically, following a series of acquisitions in 2002 and 2003. Revenue for the year ended December 31, 2005 was approximately $64 million* (2004: $51 million), representing growth of 26% on the prior year. Operating profit before depreciation and amortization was approximately $21 million* (2004: $7 million), having grown strongly during the year as a result of the significant revenue growth and a consistent operating cost base. At December 31, 2005, Verus had gross assets of approximately $25 million*.

Verus' services include point of sale authorization and transaction settlement and check conversion services. The check process includes a validation on each transaction and upon approval converts the check electronically utilizing the Automated Clearing House of the Federal Reserve. To complete each transaction, Verus transfers cash directly from the card- or check-issuing bank to the merchant's bank. The merchant also receives statements and analysis, which can be used as inputs to accounting software.

Within the Sage customer base, trials have shown a clear demand for linking payment processing services with accounting software, so that dual data entry is eliminated and data quality is ensured. To take advantage of this additional long-term revenue opportunity, Sage will enhance the value of Verus' services by integrating them with Sage accounting software.

Sage Software CEO Ron Verni commented, "Acquiring Verus expands our business management solutions into a growing market, where SMBs are showing clear demand for more automation of their business processes. For our existing customers, Verus will provide merchant payment services that can be linked to their existing Sage accounting software. For new customers, these new payment services, in addition to our payroll services and customer relationship management products, further broaden the appeal of Sage solutions beyond pure accounting."

Financial Technology Partners LLC and FTP Securities LLC ("FT Partners") served as exclusive strategic and financial advisor to Verus and its Board of Directors. Deutsche Bank acted as Sage's financial advisor on the transaction.