At $3.5 billion, who's going to buy ERP vendor Epicor?

Potential suitors include rival ERP vendors and hardware companies wanting to get into software, analysts say

Epicor has been put up for sale by private equity firm, Apax Partners, which is hoping to get up to $US3.5 billion for the enterprise resource planning (ERP) vendor, according to a report in the Wall Street Journal, but analysts say it's difficult to pin down who might be interested in buying it.

Apax bought Epicor in 2011 and then combined it with another ERP company, Activant, in a deal worth about $2 billion. Epicor had nearly $1 billion in revenue last year. Sources told the Journal that Epicor could go for between $2.5 billion and $3.5 billion, including the debt on its books.

A spokesperson for Apax Partners declined to comment. Epicor didn't immediately respond to a request for comment.

Epicor recently finished optimising its flagship ERP suite for Microsoft's technology stack in order to speed up the software and make it easier for development teams to release new features.

It also revamped the user interface, adding support for touch-based devices and the means to personalise screens to a user's liking. In hindsight, those moves may have partly been done to make Epicor more appealing to acquirers, although many of its customers are running other suites gained through the company's long series of acquisitions.

Epicor's focus on small and mid-size manufacturers, retailers, distributors and services companies could make it of interest "for a number of ERP vendors looking to expand their vertical presence around the world," said independent enterprise applications analyst China Martens, via email.

The company "is still in ramp-up mode for its pure SaaS ERP software so any purchaser would be buying more of an installed on-premises customer base on a variety of ERP products," Martens added.

Given the high potential price tag, Epicor's midmarket competitors may shy away from a bid, Martens said. But one possibility could be private equity-backed Unit4, she said. "Back in January, new Unit4 CEO, Jose Duarte, talked about aggressively positioning UNIT4 around a vertical strategy," Martens said. "He also said at the time that Unit4 wasn't looking to focus on manufacturing as a key vertical, but acquiring Epicor could add in that focus as well as adding strength in retail."

Other possibilities include Sage, which is also aligned with Microsoft technology, as well as Infor, which "is eager to push ahead with industry-focused clouds," Martens said.

Less likely candidates would be Microsoft itself unless recently minted CEO, Satya Nadella, wants to go deeper into verticals than the company's existing Dynamics ERP products do, she said. Meanwhile, SAP already has a strong midmarket product set, as does Oracle with J.D. Edwards and Fusion cloud applications, according to Martens.

Speculation on an Epicor buyer should lie elsewhere, said analyst Ray Wang, founder and chairman of Constellation Research. One possibility is an ERP vendor such as KingDee, which has a big presence in Asia and would buy Epicor to penetrate Western markets, he said.

Another possibility would be a hardware company looking to get into enterprise applications. Hewlett-Packard and IBM would seem to be less likely suitors given their focus on large enterprises, but Dell's SMB pedigree, as well as its desire to grow its software business, makes it more of a possibility.

It could also end up that another private equity firm buys Epicor, or the company is broken up and sold in pieces, said analyst Frank Scavo , managing partner of IT consulting firm, Strativa.

The best Epicor's customer base can hope for is a buyer "that has big pockets and can make investments in these systems," Scavo said. "It's as good as you can expect for a vendor that has such a diverse portfolio."

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

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Tags business issuesapplicationsenterprise resource planningIBMepicorHewlett-PackardMergers and acquisitionsOracleApax PartnersDemmMicrosoftSAPInforsoftware

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