Androm - stock.adobe.com
Epicor Software Corp. is getting ready for a new private equity owner. But there's hope that this Epicor sale, the third in its history, might be the charm.
Clayton, Dubilier & Rice LLC (CD&R), a New York-based private equity firm, recently announced an agreement to buy Epicor, based in Austin, Texas. It was valued at $4.7 billion.
The seller is private equity firm KKR & Co. in New York, which acquired Epicor in 2016. The sale price was not disclosed at that time, but Epicor was reportedly valued at $3.3 billion.
The Epicor sale to CD&R may be a positive development for the ERP vendor. The private equity investor owns firms similar to Epicor's customers. Epicor has industry-specific ERP systems for manufacturing, retail, distribution and others.
"For Epicor, CD&R may be a very good fit," said Barbara Peck, a principal analyst at Nucleus Research. "They tend to work with a company to build it, which is what Epicor needs."
Ray Wang, principal analyst at Constellation Research Inc., agreed. "This is a good deal in general for CD&R and [Epicor] customers," he said. He likened CD&R's approach to the $1.5 billion investment Koch Industries and Golden Gate Capital made in rival ERP vendor Infor last year. It was expected to deliver more funds for Infor's expansion and products, he said.
The Epicor sale will be finalized this year
The Epicor sale to CD&R was announced late last month and will be concluded later this year.
Matt Schuval, CEO at Datix Inc., an ERP consulting firm, and former president of the Epicor Partner Council from 2014 to this year, called the acquisition a "success story" for the ERP industry.
Matt SchuvalCEO, Datix Inc.
"Epicor made some key business decisions under KKR management to drive recurring revenue and reduce operating costs, which ultimately drove KKR's ability to drive up the value of Epicor," Schuval said. The key to success for CD&R will be driving long-term value for Epicor's customers, he said.
With an acquisition, "there is always change, oftentimes in executive leadership, which then drives a new culture and key initiatives," Schuval said. "I would certainly expect CD&R to shake up the current internal processes and people to drive the long-term value, as they've done in their previous investments."
When asked by SearchERP how it was explaining the change in ownership to customers, Epicor said in an emailed statement: "We let them know that under CD&R's ownership, we will accelerate Epicor's product innovation in order to bring the most customized and relevant offerings to them. With the investment announced, we will only continue to get better for our customers, while continuing to provide the personalized service they expect."
KKR was reportedly trying to sell Epicor last year. Peck said she wasn't surprised by KKR's relatively short ownership, adding that the move is in keeping with its business model.