• More capital from Apax boosts firepower
• Projects more than USD 600m in 2025 revenue

ECI Software, an industry-specific, cloud-based business management software provider, is poised to target larger acquisitions, said Trevor Gruenewald, CEO.

The move follows longtime backer Apax’s increase in its stake in the company on 28 February.

Targets can be as small as USD 5m to USD 10m in revenue up to the size of ECI, Gruenewald said. “That’s what this new access to capital allows for us. It drives more transformational deals – USD 100m-plus in revenue,” he said.

ECI, based in Fort Worth, Texas, has generated double-digit growth year-over-year. It saw 13% growth in recurring revenue, which comprises 86% of total revenue, and 11% total revenue growth. EBITDA has grown at a double-digit rate annually, he added.

The enterprise resource planning platform is geared to small and midsize businesses. Acquisition targets could be applications that integrate into the ERPs. They could focus on e-commerce, sales analytics, payment processing, business intelligence, alerts and automation, and mobility, he said. Regarding mobility, he said targets might be providers of equipment used in field services for logistics, signature capture and document management.

Targets can be vertical-specific or able to be used across multiple verticals.

The company celebrated its 25th anniversary last year and has made 55 acquisitions during that span. Of the total, 27 were under Apax’s backing, which began in 2017 when it purchased the company from Carlyle. In 2020, Leonard Green & Partners became the majority owner and Apax retained a minority stake.

But on 28 February, Apax increased its equity stake in ECI Software Solutions to become a co-control owner in partnership with Leonard Green. In addition, GIC invested in ECI at this time.

The company is expecting north of USD 600m in revenue for 2025, with 40%-plus EBITDA margins, the CEO said. For 2024, revenue was north of USD 550m, with 41% to 42% EBITDA margins.

The company has seen a fivefold expansion in EBITDA since Apax invested, according to a press release. “They knew what we can do with capital via M&A. Apax sees more scalable opportunities,” he added. Higher interest rates kept companies from coming to market in recent years but now that rates have come down, activity is likely to pick up, Gruenewald said.

There is heavy competition for assets. “At one time, 75% were proprietary deals. Today, maybe 25% to 30% are proprietary. The market has definitely matured,” the CEO said. But ECI benefits from strong relationships among its division presidents and knows many private equity groups that own companies in the space. “We are a buyer of choice for a lot of these businesses,” he said.

Valuation multiples range from 10x to 13x EBITDA on the low end up to north of 30x to 40x EBITDA, he said. ECI will pay what the market dictates, but the business must be “accretive in 18 to 24 months,” Gruenewald said.

ECI has a dedicated corporate development team and will leverage Apax and Leonard Green for support. It will focus M&A on existing markets: manufacturing; building/construction; field services and distribution. Acquisitions will be aimed at adding technology and customer bases to move to its platform, which serves 25,000 customers in 80 countries, he said.

ECI could also look at targets in adjacent markets, Gruenewald said. For example, it started out serving lumber and brickyards, home centers, retailers and hardware businesses but subsequently expanded to production homebuilders, custom homebuilders and remodeling firms. The company started out focusing on distribution and field services but later expanded to building/construction and manufacturing. Manufacturing is now its largest division and the fastest growing, he added.

In addition to adjacent verticals, there could be new verticals, he said. They must have strong management teams and market leadership, he added.

The company used to be 100% US focused but now derives 25% of revenue from outside the US, Gruenewald said. For M&A, it will look in the US, Europe, Australia/New Zealand, Canada and Latin America, where it is looking at an opportunity now, he said.

“SMBs are looking for a single vendor to support all their technology needs,” said Gruenewald, referring to small and mid-sized businesses.

Competitors include larger horizontally focused businesses typically built on accounting platforms such as Microsoft, Oracle and SAP, he said, adding that these are not focused on SMBs. Vertical players, many of which have been acquired by ECI, vary by industry. On the corporate level, competitors include Infor, Epicor, Sage ERP, and NetSuite, Gruenewald said. In manufacturing, it competes with Proshop, Fulcrum, Global Shop, Datacor, and Acumatica, he said. Lumber and building materials competitors include Paladin and ToolBX. Residential/construction players include Hyphen Solutions, Buildertrend, JobTread, and Procore. Hyphen is exploring a sale via Evercore, this news service reported earlier this month.

The company’s field service division competes with: Jim2, Asolvi, MPS Monitor, and DXone. In distribution, other players are Billtrust, Adobe Commerce, LogicBlock’s 7cart, and PrimaGO.

ECI distinguishes itself through the depth and breadth of its end-to-end solutions. “We were one of the first movers to the cloud when Carlyle acquired us,” he said. Gruenewald (pronounced “Greenwald”) has been with the company for 17 years. He became CEO in 2021.

With regard to an exit strategy, Gruenewald said the company wants to “create as much optionality as we can.” He said ECI could sell to a large sponsor, strategic or pursue a public listing. “We have the growth and profit and size and scale,” for an IPO, though he acknowledged there are not many listed players in the space.

Constellation Software rolls up software businesses but has a very different strategy, he said. The businesses operate as standalone brands. “We integrate (acquisitions) within 90 days on average,” he said.

Barclays and Centerview Partners were financial advisers and Skadden Arps Slate Meager & Flom was legal adviser to Apax on the 28 February transaction. Jefferies and Moelis were financial advisers and Latham & Watkins was legal adviser to ECI.