Monday, August 31, 2020

Another private equity cash-out for Epicor

Well, it's been four years, and they've probably levered up as much as they can, so it will come as no surprise that KKR decided to find yet another new owner for Epicor.  What's a little more of a surprise is the size of the check that CD&R wrote - $4.7 billion.  That's about 13x earnings, according to the Financial Times.

KKR paid $3.3 billion for the company in 2016.  It's worth noting that, as the FT delicately puts it, "Last month Epicor unveiled plans to issue $2.8bn in new debt partly used to pay a dividend to KKR."

Timing is everything, friends.

Thursday, June 20, 2019

No Collusion, No Financials in Acumatica Rollup

In a cheery piece that reflects much of the coverage I've seen, the analysts at Diginomica report that cloud ERP vendor Acumatica has been acquired by the private equity firm EQT Partners, which also recently bought European-born upmarket vendor IFS:
[T]his is not an acquisition by IFS, per se, but rather a tight affiliation between the two companies. This is a very important distinction given the "acquisition fatigue" that customers are feeling of late, particularly in the cloud ERP market. The first assumption many might have is that this constitutes yet another merger, and the loss of two independent players for customer choice, but that is not the case.
Well, as one of the leading purveyors and cheerleaders of acquisition fatigue, I'd sound a note of caution here.  Left unremarked in any - ANY - of the coverage of this deal, official or otherwise, is the slightest mention of how Acumatica has been performing financially.  At the risk of saying something unpopular again, HAS THIS COMPANY EVER MADE A DIME IN PROFIT?

Of course, lots of people have reported on the $48 million the company raised over five rounds, more than half of which came from a private equity round with Accel-KKR almost exactly one year ago.  It's not hard to see a scenario where an all-out sale was the least unattractive option as the company likely burned through more than $25 million in losses over twelve months.

There's also this, delicately put by Diginomica:
It is important to note that this deal also removes Acumatica's remaining Russian investors from the equation. While I have nothing against Russian investors and Acumatica's leadership was always upfront when we asked about their role, in the current geopolitical environment, this was always an awkward aspect of Acumatica's growth profile. Now any questions about that are settled.
As a well-known Twitter user might say, Complete and Total Exoneration!

But seriously, sooner or later, these PE-funded rollups will have to get serious about solving the basic business model problem of ERP software.  The answer, I humbly submit, is neither of these two currently popular "solutions":

A) Roll up legacy systems, cut costs to the bone, lever up the balance sheet, pay yourself big cash dividends, finally give up and sell to another financial buyer (e.g. most of the Infor acquisitions)

B) Start a new ERP company from scratch, sprinkle with cloud/SAAS pixie dust, burn through mid-eight-figures of capital buying market share and top-line growth, and ... give up and sell to financial buyer (Acumatica, Intacct, Kenandy - arguably even Netsuite).

We have some thoughts about that over at xTuple, if you'd like to come visit.  We're building a profitable, sustainable business by delivering an affordable commercial open platform ERP solution to hundreds of customers, and focusing intently on their success.

Old-fashioned, perhaps.  But we like it.

Friday, January 12, 2018

Sale-forced: Not enough room on the platform for Kenandy

In a mildly interesting bit of consolidation among ERP vendors on the Salesforce cloud platform, Rootstock is acquiring Kenandy, the second act of MANMAN creator Sandra Kurtzig.  As Brian Sommer delicately put it at Diginomica, Sandy "was encouraged to create Kenandy" by Marc Benioff and Ray Lane, back when he was at Kleiner Perkins.

Silly me, I'd always heard that story (the Benioff portion of which, at least, is said to have happened in adjacent beach chairs) and assumed there was an exit payday built in to that encouragement.  Apparently not.  Back to the delicate Sommer:
I asked Pat [Garrehy, Rootstock CEO] if this deal was a long-considered strategic initiative or was it opportunistic. His response: “Opportunistic.” Pat said that a lot of things fell together recently that made this deal possible. 
That leaves Rootstock and Financial Force as the ERP primary players on the Salesforce platform - and as Sommer notes, they sometimes work together too.  In fact, one hears that Rootstock didn't have its own accounting modules - at all - until just a few years ago.

Here's where your humble blogger makes another pitch for the commercial open source xTuple - an enterprise class ERP that has had a full suite of functionality for over 15 years, and is supported not just by one company, but a global community of Graveyard-proof ERP professionals.  

Wednesday, July 26, 2017

Sage buys cloud customers, more losses; will its balance sheet stay Intacct?

So some eyebrows arched upward yesterday when UK-based Sage, one of the more conservative ERP rollup shops out there, dug deep to pay $850 million for cloud-accounting vendor Intacct.

That works out to almost 10x revenues.  I can't give it to you as an earnings multiple, because like most of its peers in Software-Magic-As-A-Cloud (SMAAC), Intacct doesn't have any earnings.  Not sure it ever has - if anyone knows otherwise, please let me know either via email or in the comments below.

According to the press release, they had losses of $23 million on revenues of $67 million in fiscal 2016 (June).  Those revenues bumped to $88 million for 2017, but they must have spent like crazy to get them, because they didn't release the loss number.

Clearly Sage, with its stable of legacy products, some of which have received more facial reconstruction than others, was feeling a bit like the dowdy spinster at the ball.  But dang!  A good result for Intacct's patient investors, I guess, who have poured at least $130 million into it over the years.

Now it'll be up to Sage to see if they can make any, you know, profit.  I know, I know, that's so old-fashioned.  Maybe I just need a SMAAC upside the head.

Wednesday, March 29, 2017

You gotta admit, InforPlex would be a pretty cool name

So it appears that Plex Systems is looking to be sold for a third time, as all the phones at Francisco Partners (the PE shop that bought them from fellow travelers Apax Partners) all started vibrating with that five-year, time-to-sell reminder message.

Reuters reports that Plex, with revenues of just $100 million, hopes to be valued at "more than $1 billion, including debt."  Wow.

It's quite a coincidence.  That's the same figure I had in mind for potential acquirers of this blog.  And unlike nearly all of its subjects, The ERP Graveyard has no debt.  Please send offers in confidence to ned@xtuple.com.