Thursday, June 07, 2012

New PE plucks Plex from Apax, no IPO

Interesting... after six years, Apax Partners - a private equity firm that continues to hold an investment in Epicor - has sold its position in Plex Systems to another PE firm, Francisco Partners.  No details on terms, and Plex has never disclosed financial results (although it's talked about year-over-year growth in recent years - no word on profitability).  A Crain's Detroit article reported sales of $26 million in 2009, and a Michigan Tech News blog post last year put 2010 revenues "in the low $30 million range" and that CEO Mark Symonds expected the company "to top $40 million in 2011."  They may have just made that, judging by reports they grew 30% in 2011.

That MITech article, btw, was mainly focused on the possibility of an IPO in 2012 - which was likely Apax's Plan A for an exit.  Not sure if that was ever in the cards for a company of that size.  But anyway, how did Apax do with Plan B - the PE pass-along?

The rather bland press release isn't much help, other than the Francisco boilerplate which describes its investment range as having a floor of $50 million.  The Apax position was said to have been a controlling one, so get out your calculators, and make your best guesses.

Analyst Brian Sommer, blogging at ZDnet, tries to get out in front of skeptics like your humble host here:  "Competitors will likely try to incite FUD (fear, uncertainty, doubt) about the deal. I can already anticipate some vendor will try to spin this in the most negative of fashion."  Well, yes.  He rightly notes that Apax was due for an exit, and Francisco Partners is no Infor, Epicor, or Consona, with Plex "smashed into a massively larger firm with its piece parts put on the shelf or neglected for years to come."

But it's still a flip, and Francisco has a bit of a reputation as a quick flipper itself.  After all, as no less an authority than the President of the United States has observed, private equity guys are just in it for the money - especially on the second time around.  So what will happen next?  Cost-cutting to get the financials in better shape for a (cough, cough) IPO?  Not unless they grow revenues 1000% for the next couple of years.  More likely, Francisco itself will look to dress it up for one of the aforementioned acquisition shops - or maybe even a Tier 1 player - to get its money out.  So yes, Plex customers and partners should still sleep with one eye open.

As a noted industry observer pointed out recently, cloud software vendors - particularly 100% pure plays like Plex - don't always make it easy for customers to walk away.  If Francisco Partners does turn out to be just a way station on the road to a glorious destiny at Epinforacle, it might be prudent to start exploring other options now.