Private equity giant Apax has moved aggressively into mid-market ERP by snapping up Epicor Software Corporation in a £600m deal.
Epicor focuses on manufacturing, distribution, retail, hospitality and services, with CRM and supply chain management platforms in addition to ERP, and Apax is offering $12.50 per share in cash, for the deal.
The offer is an 11.2 percent a premium on the stock’s closing price last week – a significantly lower premium than CSC is paid today to buy up its core NHS IT supplier iSoft.
Apax has also announced an agreement to buy Activant Solutions, which provides management software for US-based mid-market retail and wholesale distribution businesses.
Jason Wright, a partner at Apax said "Epicor is a true innovator and is extremely well positioned in the enterprise applications software space. The company not only offers deep industry-specific functionality localized and translated for all major global markets, but also unprecedented choice and flexibility through the unique ability to deliver its next-generation solutions on-premise, on-demand, hosted, or in the Cloud.”
Activant is a leader in providing comprehensive ERP and Point-of-Sale software to the distribution and retail markets predominately in North America, he added.
The move will intensify comeptition in the ERP space as establsihed palyers such as SAP and Oracle fight it out with new with cloud providers such as Netsuite join revitalised organisations such as Infor in a bid to win the all important mid-market.
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 modernising 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."
Chris Kanaracus of the IDG News Service contributed to this report