General Consultant Discussion

Kind of knew this was coming, especially with the CEO switch, but looks like its official now: http://online.wsj.com/news/articles/SB10001424052702303417104579544453004040402

If you can't read the whole thing due to WSJ weird security, here it is: Apax Partners Puts Epicor Software on the Block Deal Could Fetch As Much As $3.5 Billion By MIKE SPECTOR, GILLIAN TAN and DANA MATTIOLI CONNECT May 5, 2014 7:53 p.m. ET Epicor Software Corp., a private-equity owned company that assists other firms with sales and supply-chain management, is on the block and seeking as much as $3.5 billion, said people familiar with the matter. The company, purchased by London-based buyout firm Apax Partners for around $1.04 billion in 2011, is working with Jefferies Group LLC to seek buyers. Valuations for the company differ, but people around the deal say Epicor could fetch between $2.5 billion to $3.5 billion, including debt. Epicor, based in Austin, Texas, serves the distribution, manufacturing, retail and services industries world-wide. It posted sales of $978.3 million in 2013 and carries about $1.3 billion in debt, according to public filings. After purchasing Epicor, Apax merged it with another rival software-maker, Activant Solutions Inc., which was previously owned by Hellman & Friedman LLC, JMI Equity and Thoma Bravo LLC. In 2012, Epicor paid $155 million to acquire another smaller rival, Solarsoft Business Systems, from Marlin Equity Partners. In 2012 and 2013, Epicor issued $340 million and $350 million of new debt respectively, to fund dividends to its private-equity owner, according to S&P Capital IQ LCD. A sale of Epicor would follow private-equity deals involving similar software companies. Earlier this year, Blackstone Group LP and GIC Private Ltd. paid $750 million for a minority stake in human-resources software company Kronos Inc. in a deal that valued the company at $4.5 billion including debt. And in late 2013, Hellman & Friedman acquired insurance software maker Applied Systems Inc. for $1.8 billion including debt.

FYI, my 'puff piece' on this :) http://www.clientsfirst-us.com/blog/epicor/apax-partners-looking-to-sell-epicor-software-corp/

Somebody asked me about who I think the suitors are. This is just my speculation: According to the article its 'up for sale'. My guess is leaking this out is a fast way to advertise to potential suitors to line up and start bidding. This is by no means a firesale. Apax sure knows what they are doing. So as politicians like to vilify hedge funds and companies like Mitt Romney's, when you see it from the inside, you have to admit, with all their warts, the Epicor situation is a lot better under Apax than it was under Klaus. In a perfect world, to me, there is a reason they went 100% microsoft. Even to their own detriment (i.e. Crystal is way easier than SSRS). However, given they already have 4 ERP products and I still think Microsoft regrets ever getting into this business, I doubt it would be them. I pray it isn't Infor, but based on bob scott's recent article, it sounds like they are fighting for their own survival so I doubt they have a spare 3 billion they could raise. There aren't that many companies that could make such a big purchase. They could swap to another hedge fund, although Apax is among the largest, or they could go public again and arbitrage, but the article doesn't indicate that. To me, it would have to be somebody like SAP (which would actually be great as they have the best partner program in the industry), Oracle (yuck), Sage (would be a giant overlap with X3 and would be a really big financial nut to swing) or maybe something weird like Netsuite using all their 'free' money they get from getting SaaS valuations and they know they don't have products to fit these niches. However, they would be beat up on all the negative press around the old technology part of the Epicor suite of solutions. I sure hope it's a company used to a partner channel, hence to me SAP would be best for us. But there would be a lot of overlap with SAP All In One (not business one).

I take issue with your initial comment about this not being a fire sale. When's the last big deal you saw executed in a similar fashion. Usually companies pull this kind of stunt out of some sort of desperation to attract multiple bidders. I wonder whether the days of the ""buy up all the ERP and we'll figure how to make money later"" are gone. Aside from running Epicor as a separate division there does not seem to be much of a play here. History has shown that buying a separate code base and hoping the users (or technology) will migrate to your flagship product just doesn't work. That said I agree with your assessment. I'd think SAP might be the likeliest bidder though in reality I will not be surprised if Epicor goes public again or prior management were to re-appear and make some type of attempt at purchasing and going public.

The price they are 'asking' is significantly higher than they paid. That's not the definition of a fire sale. It's crazy to not look for multiple bidders if you can. Call me crazy but I wouldn't be surprised but I could see Dell taking a nibble at this

I would agree with Mark ... unless the 3.5B number is simply a price anchor, this is a big ask compared to what they paid just three years ago! Not the traditional definition of a fire sale imo. The question is why are they selling? Is it to free up cash for other investments? Or do they see something ugly coming down the road? If they have really created double or triple the value in three years, there must be some amazing cash being generated from it that would warrant holding tight. So what's driving this sale? Maybe it is actually a fire sale that they are a disguising by inflating the ask?

I think they are just arbitraging the purchase of Activant, Epicor and a few others. As soon as you hit 1 billion, your multiples go up. Apax, knows what they are doing and I'm betting this is exactly according to plan

$976 Million was what they paid for Epicor. Assume similar for Activant as the total value was said to be $2 B. http://www.computerworld.com/s/article/9215462/Update_Equity_firm_to_buy_ERP_vendors_Epicor_Activant_for_2B

They said they are asking between 2.5 and 3.5 billion. Sounds about right

http://www.epinforacle.com/

Ugh, that would be a nightmare