Tuesday, December 01, 2015

IFS taken over by Swedish PE firm

Well, a buyout by Microsoft would have been more fun for us here at the Graveyard, but now we'll never know.  Sweden-based IFS has sold a majority stake to Sweden-based private equity firm EQT Partners.  The deal works out to about 2.7 times TTM revenues of US $330M, and nearly 30x EBIT of $35M.

Friday, June 19, 2015


Yowza.  Those who have followed this blog for a while know that I'm constantly aghast at the brazenness of the financial owners of legacy ERP companies - crafting exotic debt instruments, levering up the companies they acquire (and, in a sense, their customers) ... all the while, finding plenty of ways to pay themselves extravagant dividends.

Well, Bloomberg is reporting that Apax Partners, owners of Epicor, had to go hat in hand to Jefferies Group to "arrange" $2 billion in new borrowings - because two big banks "passed on managing the offering because of concerns it would run afoul of regulatory guidelines against excessive leverage":

The debt sale, along with a spinoff the company is doing at the same time, would push Epicor’s debt to 7.5 times a measure of its earnings, Moody’s Investors Service said in a statement on Monday in which it cut the company’s credit ratings. The leverage is beyond the ratio of 6 times earnings that U.S. banking regulators have said raises concern. Jefferies, a New York-based broker-dealer, falls outside the purview of banking regulators.

That's not all:

Moody’s lowered the credit ratings of Epicor to six levels below investment grade to B3 from B2, citing the “material increase” in leverage and the aggressive financial policies.
S&P changed its outlook on the company’s B rated debt to “negative,” according to a report Monday. The $300 million dividend follows the company’s approximately $380 million payment to Apax in June 2013, the report said.

Wow.  For a somewhat more light-hearted take on this topic, see the collection of Epicor-inspired POE-try here.

Does this mean MS is looking to unload Dynamics?

Well, now this is interesting.

As veteran Microsoft tea-leaf readers like Mary Jo Foley help the world to understand Satya Nadella's recently-announced reorg, Diginomica's Phil Wainewright indulges in a bit of speculation:

The other possible outcome is to put the Dynamics sales and partner organizations up for sale. This alternative strategy would allow Microsoft to focus on its core platform and product engineering strategy without the conflict of having a sales team intent on winning business away from its growing army of third-party partner vendors. Some or all of the ERP products would doubtless be part of that transaction, while Microsoft would likely prefer to retain the CRM product because of the tight integration that’s possible to its Office properties. But the ultimate decision may depend on who the buyer will be.... I think it’s more likely that Microsoft would look to sell off some or all of its legacy ERP portfolio to a ‘friendly’ competitor — one that’s committed to the Microsoft stack. 

He mentions Sage and Unit4, a PE-backed European vendor, as possibilities.

(Lest your humble blogger be accused of selectively parsing the speculation, Wainewright also suggests MS may look to acquire other vendors, rather than divest.  But I think the part I've quoted above makes more sense, and seems plausible given Nadella's recent actions and public statements.  We'll see...)

It's also worth noting that Frank Scavo, noted ERP analyst at Strativa, draws the opposite conclusion.

Tuesday, May 19, 2015

Dynamics IF?

Interesting chatter about Microsoft buying Sweden-based IFS.  Haven't heard much about them as an acquisition target in the past.

Thursday, October 09, 2014


So "funds advised by" Apax Partners, the PE giant who has danced in and out of the ERP graveyard for years (most recently failing to find a buyer for Epicor), will be acquiring Exact Holdings, the Dutch rollup which acquired several Tier 2 and Tier 3 ERPs back in the day.

Here's a detailed announcement from the company.

Haven't seen any discussion anywhere yet about potential combinations with Epicor, which would presumably hinge on the nature of the relationship between Apax and these acquisition funds.  The price tag for Exact is $925 million, a little less than Apax paid for Epicor in 2011 (they were looking for at least $3 billion to flip it this year).

Of course, the most likely scenario is just that the "funds advised by" Apax made Exact an offer that was too good to pass up.  The company announcement notes:
The Offer Price represents a premium of 27% to the closing price of 10 July 2014 and a premium of 40% to the average closing share price of the last 12 months prior to that date.
What it doesn't say is that the stock has been consistently down another 10% or so since July, so the premium is even higher than that.  Perhaps the "funds advised by" Apax are looking for a way to pay themselves some nice dividends, like Apax did for itself when it straddled Epicor with additional debt.

For what it's worth, the Bloomberg report on the deal dispenses with the "funds advised by" fig leaf, and just says Apax.  It also includes this beaut of a quote from a Dutch financial analyst:  "Software providers in general are very attractive for private equity, especially when the stocks are trailing due to macroeconomic developments."

In other words, if you've got to put your money somewhere in a crappy market, buy companies with captive customers.  (Here's where I make my regular pitch for open source ERP, which has the effect of giving those customers real choice and control over their software investment...)

Stay tuned.