Has Epicor Found a Buyer?

On July 28th, Reuters posted an article that, according to sources, CVC (a private equity firm) has emerged as the front runner to buy Epicor from Apax Partner, LLP. for $3 billion.  The article emphasized that the deal is not finalized yet.  It also mentioned 2 acquisitions that Epicor had made totalling $2.115 billion to reach it’s size (which from our thinking then infers that originally the company had a $845 million valuation or that overall the company valuation has declined.)

Apax Partners is a private equity company, as is CVC Capital Partner Ltd. Should CVC complete this deal, it will probably mean more debt to service for Epicor. That’s the way private equity works.

There was a comment on the Reuters posting that was interesting:

PatrickHarding wrote:

So CVC will save the day and purchase Apax’s throwaway

But will they, several years from now

Shout WTF or holy cow

Why ever did we buy this turd

It’s made our returns look absurd

And now we have to find a route

To exit quickly with as much loot

as we can manage to carry away

And find a sucker we can play

Jul 31, 2014 2:28am EDT  —

Epicor’s Brief History: Epicor has rolled up Eclipse and P-21 along with a number of other software companies (Prelude, Array, and Speedware to mention a few) over the last few years. Eclipse really enjoyed good sales in the late 80’s and 90’s. If memory serves me correctly, this will be the 4th sale of Eclipse and 3rd of P-21 in the last 15 years. Each time more debt has been added. That is the way private equity works. Private equity firms then seek growth strategies in combination with cost cutting to recoup their investment (and inevitably give themselves a dividend) before they pretty the company up to sell to someone else (and frequently this is another private equity firm!)

The Reuters article is just an early alert that a deal might be in the works. The outcome is not known at this point. There could be some type reduction of debt from Apax Partners, maybe some type of bankruptcy, maybe someone else comes along to buy it, perhaps elements of Epicor get sold to maximize shareholder return. Who knows at this point?

Getting off the Merry Go Round: At some point distributors may wake up and seek a different solution or upgrade, especially if they are dissatisfied with their support levels of the system’s ability to adapt and support their needs. SAP and Oracle would seem to be a natural migration path for really large companies. But they require money, and a different custom support system.

From a cost perspective Infor Global Solutions would be a natural cost effective migration pathway as they have built the middle ware (ION- Intelligent Open Network) to connect to many programs.

Or maybe it is Xtuple, an open source ERP that allows you to download the portion you wish to use either as a cloud application or download to your computer.

Planning for the future: Software technology changes the way you plan your business growth. Customer outreach and connectivity become real sales points. Just as EDI allowed many electrical distributors to enter multi-year contracts, web store fronts are becoming more robust. Mobility now plays more and more into business planning. With increasing people cost and thinner margins, companies are being forced into using technology. No longer is a distributor’s ERP system solely for order taking, inventory management and accounting. Nowadays it is a sales tool and perhaps a virtual branch … it’s revenue generating!

At some point you may decide that your older software ERP system (either custom written or bought from a software company) costs you too much to support and doesn’t let you effectively compete in the marketplace, and perhaps hinders your growth plans. So, what steps do you take to transition your company to newer technology and how do you make sure it actually works? Instead of letting ERP software companies put on their “Beauty Contest”, where they show you what they want you to see, there is a more logical approach that is offered.

And for Eclipse users, is a sale to another private equity group a positive to you? What are you looking forward to or are concerned about?