Manufacturing customers of Epicor Software’s ERP software have been surprisingly blasé about the recent news that the company is being pursued as a takeover target by the New York hedge fund Elliott Associates. At Epicor’s recent customer conference in Las Vegas, manufacturers told us they were more interested in Epicor 9, the company’s latest enterprise software suite, than any unsolicited bid for Epicor.
Maybe customers should be a bit more alarmed. I’m sure Epicor’s board and top management are.
It turns out that Elliott Associates, according to recently published reports, is an ultra-aggressive financial predator that, based on a review of its history, has little interest in or experience with running a software company.
According to an article published last year by Bloomberg Markets, Elliott and its founder Paul Singer have become successful by buying up the debt of bankrupt and financially troubled countries, then doggedly pursuing creditors in court for payment. Elliott has done this in strapped developing countries such as Peru, Argentina, and the Republic of Congo where local press reports have labeled the company a “vulture investor.”
Singer’s tactics have been remarkably successful. Elliott, with $9.8 billion in assets, has beaten the performance of the Standard & Poor’s index for each of the past 30 years.
But, like other well-known hedge fund investors, Singer also likes to throw his weight around. Last year, along with hedge fund mogul Carl Icahn, Singer invested in troubled Motorola and, after an unsuccessful takeover bid, forced the resignation of CEO Ed Zander.
Singer doesn’t seem to shy away from his widespread reputation as a financial bully. In the Bloomberg article, he says he finds it easy to intimidate his targets. “We don’t see many people willing to stand up for their shareholder or bondholder rights,” Singer is quoted as saying. “If you don’t defend your rights, what do you have?”
Singer’s Epicor play seems to be rooted in opportunism. In the midst of a sudden downturn in the enterprise software market, he buys 10% of the company, then makes an unsolicited $9.50-per-share play for Epicor. Then, with Epicor vulnerable in a shaky market, he reduces his bid with the hope of picking up the company cheap.
Epicor’s board has attempted to reject the bid. But customers who rely on the company’s software to run their businesses shouldn’t become too sanguine about the situation. Based on his track record, Singer isn’t likely to give up before he’s had a chance to pick over Epicor’s bones.
—Jeff Moad, MA Executive Editor
Posted by Diane Himes at 11/07/2008 04:23:38 PM |