Epicor Software up for Sale by Apax Partners
The May 6th issue of The Wall Street Journal ran an article that Apax Partners (the private equity owner of Epicor) was seeking to sell Epicor for between $2.5 – $3.5 billion.
Apax Partners is a London based buyout firm that had purchased Epicor and merged Activant back in 2011 for around $1.04 Billion. The resulting company was Epicor with the some of the remaining software products including Eclipse and Prophet 21 (P21). Work was pursued on what would be their flagship product, E-9, while they continued to sell Eclipse and P-21.
Actviant had a rich history of purchasing other software systems as they grew, such as Profit 21(P-21), Eclipse, Prelude, Speedware and etc. In the process they had taken on more debt. We have referenced such purchases on www.Electricaltrends.com in past editions. You can find other postings related to Epicor on www.electricaltrends.com by using the Search function on the site. Some of the postings include:
Additionally Activant, and now Epicor, was / is involved in providing the infrastructure for IDEA’s IDW and the IDX as well as Vista Information Services which a number of electrical distributors contribute content to and some manufacturers subscribe to for product marketing intelligence. Vista also supports manufacturers in other industries.
In 2012 and 2013 Epicor, according to the WSJ article, issued $340 million and $350 million of new debt respectively to fund dividends to its private-equity owner APAX.
Assuming the WSJ article is correct, and there is nothing to assume it isn’t, and knowing the amount of debt the company has (the article states $1.3 billion in debt and revenues of $978.3 million), it makes one wonder what the incremental debt load would be for an acquirer? And if feedback from distributors is correct that Epicor’s support and product development has suffered due to expense management, what will be the result if a new firm has a higher debt load?
Over the past couple of years we’ve commented on some of these issues and others have questioned the longer-term viability of the strategy. And from an Apax viewpoint, this is probably the right strategy. The questions were raised about the viability of software support and new software patches. A lively and long term discussion followed.
According to the Wall Street Journal article the sale of Epicor would follow private-equity deals involving similar software companies. But the valuations for the company may vary.
Now, many large distributors (and lots of regional and smaller independents) are Eclipse users. They tell us it is fine software.
- “Can you be self-reliant”? By this we mean manage your own support or arrange for 3rd party support like the Zerion Group?
- “What is your product road map, especially for things like eCommerce?” Will the platform be invested in to evolve as the industry evolves or will you need to consider “bolt-on’s” and other solutions?
- Or do you seek support from Infor Distribution as you transition through their best in breed open source ION product?
These issues are important to future acquirers as they are key revenue streams that drive the value of the company (acquirers value subscription revenue at a higher multiple than intermittent sales, especially for markets that are relatively saturated …do you know many distributors who don’t have an ERP system or are looking to convert … let alone considering this annually?
From a an acquirer viewpoint, who makes sense? Infor Distribution? SAP? Microsoft? Oracle? another private equity firm?
- A split up of the company / selling it in pieces probably won’t happen – it’s too costly to Apax and probably leaves them with some unselable pieces. The four software companies mentioned above all have pros and cons. Another PE firm may make sense but that is just “kicking the debt issue down the line.” Whom would you like to see acquire them (from an electrical distribution viewpoint? … perhaps a group of distributors, or the Eclipse Users Group, should acquire Eclipse (similar to the way the old Rigel system was owned)?
- And here’s an interesting article from PC World speculating on potential acquirers and wondering who would want the company since a deal is really for the existing customer base potential and not for new account development.
So if your company is a user of one of Epicor’s ERP software products, how does this affect your growth potential and productivity? How concerned are you about them being sold? Could it represent disruption for your business?