In another example of the continuing consolidation of the distribution software industry, Prophet 21 has been acquired by Activant Solutions Inc., an Austin, Texas-based business-to-business software firm, for $215 million.
Prophet 21, which acquired Trade Service Systems Inc., the largest provider of business software for distributors in August 2004, has interests in several different segments of the distribution industry. Although the electrical market is one of its larger business segments, it also has customers in the industrial, fasteners, tile and floor-covering and fluid power markets.
Activant Solutions provides business management solutions to small- and medium-sized businesses in four primary vertical markets: wholesale distribution, hardware and home center, lumber and building materials, and the automotive parts aftermarket. Activant Solutions also provides software and related services for IDEA’s IDW2. IDW2 is a central repository for pricing and product data for the electrical wholesaling industry.
Activant acquired Prophet 21 to give it the No. 1 position in the wholesale distribution market, said Doug Levin, Prophet 21’s executive vice president. Prophet 21 will become the wholesale distribution unit for Activant, he said.
“This latest acquisition is part of Activant’s ongoing growth strategy to become the premier provider of vertical business management solutions, serving small-and medium-sized businesses,” said Larry Jones, CEO of Activant Solutions. “Prophet 21’s next generation business management solution, CommerceCenter, and e-commerce offering, Trading Partner Connect, give Activant a more comprehensive solution set that deepens our market expertise and leadership in the wholesale distribution industry.”
Activant will continue to support and enhance Prophet 21 products as well as Activant’s current wholesale distribution offerings, including Activant Prelude and Activant Eagle for Distribution. Activant now has 22,000 customers overall, including 400 customers in the distribution market. The acquisition would give it more than 4,000 customers in the distribution market.
Prophet 21 was founded by John and Dorothy Meggitt in 1967. The company’s management team recently bought the company and took it private. According to a report last year in Modern Distribution Management, in 2003 the management team bought the company with a $70-million cash deal from the Meggitts, who had been 51.2 percent shareholders. Prophet 21 went private through a merger agreement with an entity formed by Thoma Cressey Equity Partners Inc., Chicago, Ill., and LLR Partners Inc., Philadelphia.
Levin said Activant was interested in Prophet 21 because they wanted to get into a new market and they saw the company as the dominant player.
“We were interested in them because they made us a much stronger company and a larger company,” he said. “In the software business you need to be larger so you have the dollars to reinvest in research and development.”
He added that the distribution software business is consolidating because many of the smaller players that started up 20 to 30 years ago haven’t been willing to reinvest in their products, but that their loyal customer bases made them attractive to larger players. He said Prophet 21 had acquired seven of these companies in the past two years.
All of Prophet 21’s office locations will remain open. The two companies are still in discussions over branding. Activant would be the dominant brand, but Prophet 21 is likely to be used in some capacity.