After a flurry of acquisitions, ECI Software is itself to change ownership. Leonard Green & Partners is to acquire the company from funds advised by Apax Partners and The Carlyle Group. Apax Partners will retain a minority stake. Neither party disclosed the financial terms of the deal. However, PE Hub revealed that the deal was worth around $2.5 billion and saw Apax make four times the money it invested in the company. Though whether that is the original investment sum or the total invested is unclear.
Since the original acquisition by Apax Partners and its merger with the Exact and Macola businesses, ECI Software has grown through acquisition and organically. The most recent of the 15 acquisitions was that of Shoptech Industrial Software, adding another Manufacturing ERP solution to its portfolio. ECI software develops and sells ERP solution to small and medium-sized businesses across several verticals. Its solutions are used by 22,000 customers mainly in North America but with a strong presence in Europe and Australia
Ron Books, ECI’s Chief Executive Officer commented: “The ECI team and I have had a powerful partnership with Apax and Carlyle as we have built the company into a leading SaaS business software solutions and services provider.
“They have been instrumental in the tremendous growth of our company, and we are proud of what we accomplished together. We are excited to welcome LGP as our new partner, and I am confident that this is the right choice for our future – and the future of our 1,700 employees and more than 22,000 customers.”
What will LGP do next? Usama Cortas, Partner at LGP, said: “We are delighted to be partnering with a mission-driven company like ECI, which is focused on supporting the activities and growth of small to medium-sized businesses around the world. We invest in companies that win with people, have a differentiated culture and are market leaders with multiple ways to grow – and ECI is the perfect example. ECI has built an incredible track record of success, and we are excited to be partnering with ECI Management and Apax to support and accelerate the next phase of the company’s growth.”
The question is whether LGP will support the continued hunt for acquisitions to build a portfolio of solutions. This seems less likely. During the Apax era, ECI Software continued to develop its software and grow its user base. The question is whether it will look to consolidate its solutions or bring them closer together with a platform approach.
For example, it now has five manufacturing ERP solutions. These are M1, JobBoss, Macola, Max and now the Shoptech solutions E2 Shop System and E2 MG system. While some of these operate in slightly different target markets, there is an overlap between them.
However with Apax Partners still involved do not rule out further acquisitions. Jason Wright, Partner at Apax Partners, commented: “We have been proud to partner with Ron Books and the ECI management team over the past three years as they have executed their plan and transformed the Company through investment in products, international expansion and the completion of 15 acquisitions. Importantly, Ron and the team have instilled a unique culture that is customer-centric and employee-friendly. We’re excited about the opportunity to partner with LGP during this next phase of ECI’s growth.”
Enterprise Times: What does this mean
One clear winner in this deal is the Carlyle Group. Steve Bailey, Managing Director at Carlyle, commented: “It has been a tremendous journey with Ron and the ECI team and Apax over the years. Carlyle’s strategy is to focus on vertical market SaaS investments or successfully transition software businesses to a SaaS model. Our partnership with ECI is a great example of the latter. Through embracing the opportunity in SaaS, ECI has accelerated its growth while also benefiting from strategic acquisitions. We wish the team every success for the future.”
The next phase of the ECI Software journey, especially in the manufacturing segment, is likely to be trickier. Competition is increasing as companies like Acumatica are growing quickly and Epicor now has a clear cloud strategy. What the company does have is several strong brands with loyal customers that can help it thrive.
The big question is, how it will leverage its development expertise without overlapping efforts? This is something that Infor achieved after its series of acquisitions. Still, it took a lot of investment in R&D, more acquisitions and several years where it often lagged behind the opposition. It will be interesting to see how ECI Software evolves once the deal is complete.