Private equity firm to buy Epicor, Activant in US$2 billion deal

Buy will create one of the world's largest ERP vendors, companies say

Following close on the heels of Infor's unsolicited offer to buy rival ERP vendor Lawson, private equity firm Apax Partners has announced that it is buying Epicor and Activant in a deal it says will create one of the world's largest ERP vendors.

Apax is to pay US$976 million for Epicor. Specific terms of the offer for privately held Activant were not disclosed, but Apax said the combined deal was worth about $2 billion. The deal is expected to close in this quarter.

Once combined, Activant and Epicor will have 30,000 customers and $825 million in revenue. The new company will be named Epicor Software Corp, but won't be publicly traded.

The pending merger is "extremely positive for Epicor's customers, employees and shareholders alike," Epicor CEO George Klaus said in a statement.

Shareholders controlling about 32 percent of Epicor's shares have indicated support for the deal, according to a statement.

Epicor is known for its focus on ERP software for manufacturers, while Activant has products for retailers and wholesale distributors.

News of the deal comes just weeks after another major ERP acquisition attempt. Last month, Infor made a roughly $1.8 billion bid for Lawson Software, which so far hasn't publicly accepted the offer. Observers have speculated that other ERP vendors, such as Oracle, may submit counteroffers for Lawson.

Apax may also see some competition for Epicor and Activant. Under the deal's terms, Epicor has until May 4 to solicit better offers from third parties, according to a statement.

"Activant has a big chunk of the wholesale distribution market," said analyst Ray Wang, CEO of Constellation Research. The combined company "could be a one-stop shop for manufacturers to distributors to service firms," he added.

Counter-bids may come in from Infor or Microsoft, "but that seems unlikely right now," Wang said.

The deal should be placed in a context beyond the ERP market, he added.

"There is a race to get to $1 billion [in revenue]. At $1 billion, software companies gain economies of scale that allow the right amount of R&D. It's imperative to get to that size to compete and invest," Wang said.

Both Activant and Epicor have done a good job of addressing micro-vertical markets, Wang added. However, while Epicor has done a good job of modernizing its technology, "Activant has been a laggard," he said.

Customers of the companies should move quickly to secure product requests and enhancements now, as well as to lock in the terms of their annual maintenance contracts, he said.

Private equity firms focus on squeezing out costs from companies they acquire before selling them at a profit, Wang said. "That being said, we should wait to see what Apax has in mind."

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