Activant and Epicor Software to Merge

Relatively few people in the electrical wholesaling industry have heard of Epicor Software Corp., Irvine, Calif., but it’s about to become a much better-known company name in this market.

Epicor and Activant Solutions Inc., Livermore, Calif., were purchased on April 4 for a combined sum of approximately $2 billion by Apax Partners, New York, a global private-equity firm that invests in technology companies. If the mergers close as expected by the second quarter of 2011, the new entity will be known as Epicor Software Corp. The new company will have the financial backing of Apax Partners, which manages more than $40 billion in funds and is a big player in the technology, telecommunications, retail, consumer, media, healthcare and financial and business service markets.

Epicor is actually larger than Activant when measured by annual revenues. According to its most recent 10-K, Epicor had 2010 sales of approximately $440.3 million. To date, Epicor has focused on providing enterprise resource planning (ERP) software for distributors and manufacturers in the restaurant, hotel, automotive manufacturing and consumer packaged goods arenas. It hasn’t yet made its mark in the electrical wholesaling industry, but reportedly has several distribution packages installed at several smaller supply houses that sell both electrical and plumbing supplies.

Currently owned by investment funds affiliated with Hellman & Friedman LLC, Thoma Bravo LLC and JMI Equity, and by management, Activant is the owner of several well-known distribution software packages including Eclipse, Trade Service Systems, Prophet 21 and Prelude Systems. According to its 10-K, Activant had 2009 revenues of $370.75 million and 1,700 employees, according to information on its website. The company is best-known in the electrical wholesaling market as the industry’s biggest software provider, for the data it provided to power IDEA’s Industry Data Warehouse (IDW), and for the SKU-level data its Vista Information Services unit provides.

But at $217.37 million in 2010 revenues its retail products, services and data division for distributors, hardware stores, lumber stores, auto supply stores and other companies in the retail markets actually accounts for a bigger slice of its total business (approximately 57 percent). Activant’s Wholesale Group, which includes the distribution software packages for electrical distributors, accounted for $153.38 million (approximately 43 percent) of the company’s total 2010 sales. Sales of systems to distributors totaled $51.56 million, while services accounted for $101.72 million.

In a press release announcing the deals, Jason Wright, a Partner at Apax Partners said Epicor can deliver its next-generation solutions on-premise, on-demand, hosted, or in the cloud, while Activant is a recognized leader in providing comprehensive ERP and point-of-sale software to the distribution and retail markets predominately in North America.

“Both Epicor and Activant’s customers will benefit from the combined entity’s increased scale, solutions portfolio and expanded service offerings,” Wright said. “Epicor will have access to additional domain expertise, particularly in wholesale distribution and automotive, hardlines, lumber and specialty retailing. Activant will benefit from an accelerated roadmap to international operations, softlines retail functionality, and additional supply chain and manufacturing capabilities.”

Pervez Qureshi, Activant president and CEO, said in a press statement that Activant and Epicor’s retail business solutions would cover the full spectrum of retailing from small retailers to national apparel chain and global general merchandise department stores. “Additionally, with Epicor’s worldwide infrastructure, we will have the opportunity to service and support Activant products internationally, which is very important as our customers compete in an increasingly global business environment.”

The two companies are expected to have combined revenues of more than $825 million and more than 30,000 customers on the books. Before the announcement, Epicor Software had a market capitalization of $710.1 million (as of April 1). Jefferies & Co. and RBC Capital Markets served as financial advisers to Apax, while Kirkland & Ellis was its legal adviser. Activant was advised by the law firm Simpson Thacher & Bartlett.