ERP (enterprise resource planning) vendor Epicor is about to begin a pivotal chapter in its long history, having once again been sold to a private equity firm, with KKR acquiring it for a reported $3.3 billion from Apax Partners.
Apax had purchased Epicor in 2011 and merged it with Activant in a deal worth about $2 billion. It began shopping Epicor around as far back as 2014 and hoped to get about $3.0 billion for the company, according to a report in the Wall Street Journal at the time.
Private equity firms have a reputation for squeezing out costs from the companies they buy, leading to a reduction not only in headcount but research and development.
Epicor CEO Joe Cowan says that will not be the case under KKR's ownership, and that in fact, Epicor customers can expect ample investments in innovation over the coming months and years.
"The major thing with Apax is that they were nearing the end of their investment cycle and they didn't want to spend any money," Cowan told Constellation Research in an interview. "They wanted to maximize their exit value. With KKR, we're at the beginning of the runway." Epicor plans to spend some time initially building out a strategic plan with KKR, Cowan says.
For example, Epicor wants to expand its footprint internationally, Cowan says. You can expect Epicor to make additional acquisitions, although they will most likely be strategic in nature, he adds. "Those are the kind of things we've discussed with KKR and they like that plan," Cowan says. "They're buying us for the upside, not for a bottom-line squeeze."
Epicor's Paths to Growth
The company's flagship suite, Epicor ERP 10, was announced in 2014 and is built on the Microsoft stack. Epicor made the move in order to speed up the applications and product development. Several thousand Epicor customers have move to Epicor ERP. The company has more than 20,000 customers overall.
Since the launch, Epicor has "done a lot of things to make the product a lot better," such as by fleshing out its global financials capabilites, Cowan says.
Epicor ERP provides a solid development platform, the company expects to find growth through an expansion of its partner program. A natural target for this would be consulting companies that focus on Microsoft Dynamics, given the similarities in the underlying technology and target customers.
Another goal is to move those legacy application customers onto Epicor ERP, whether on-premises or in the cloud (Epicor ERP has a single code line for both deployment options).
Epicor is crafting a migration program targeting customers of older products such as Vista and Vantage, but the details are still being worked out, Cowan says. In June, Epicor acquired a UK consulting firm called Dot Net IT, an existing partner, to help provide the necessary software tools for the program, such as its Data Management Tool (DMT), which is currently used by Epicor customers and integration partners worldwide.
"The goal is to make it smooth," Cowan says. "If it's a reimplementation, we're in trouble."
The Bottom Line
KKR is expected to close the Epicor acquisition in August. What happens next remains to be seen—after all, every new relationship has a honeymoon period—but taking Cowan at his word, Epicor customers and prospects should be heartened by the company's plans now that it has an owner willing to open up the purse strings in the name of growth and innovation.
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