by John M. Covaleski
Dallas - E-Partners, the accounting software reseller consolidator on a fast track in the late 1990s, appears poised to become much more active after two years with no mergers or acquisitions.
The company has hired a new chief executive - David Dunnigan, a former top executive for database developer Pervasive Software - and in a separate matter, completed its first acquisition since 2000 - Merideus Corp., an Atlanta-based consulting firm. It’s also expanded its market scope to concentrate more on large Fortune 1000 clients, in addition to its longtime focus on middle-market companies of from $10 million to $500 million in annual revenue.
Dunnigan, 41, replaces Stanley Strifler, who joined E-Partners in 1999, when it was known as TexSys RD. The venture capital-backed company was then on pace to go public. It had grown from a start-up in the mid-1990s to about $50 million in revenue in 1999, almost exclusively though the acquisition of some 20 software reseller firms and merging them into its national organization.
However, the reseller acquisition activity stopped in 2000, the IPO plans stalled and there were scattered reports of dissatisfaction among some resellers that had joined E-Partners. Also, the company’s reputation was bruised when an acquisition target, the ECS consulting division of New York CPA firm Eisner, sued E-Partners alleging that the consolidator used the acquisition talks as a ruse to gain access to ECS’s proprietary market information.
Dunnigan pledged that E-Partners would continue to expand. He added that he is sticking with its original plan to become a reselling/consulting powerhouse with sales and implementation offices in regions and local markets around the world all supported by centralized administration, business management and marketing operations.
E-Partners’ headquarters, just outside Dallas, serves as the base for all the administrative and human resource functions required by its units, and as the base for national business support services, including customer training, national marketing, specialized product development and dealings with vendors whose products are sold and installed by the local units. Some services also include regional and local operations, such as the training group’s ability to provide training at client locations.
Moreover, because of its size - more than 400 people and 20 offices - E-Partners can operate service divisions that specialize in the major technology products and key technologies now in demand. For example, it has national practices dedicated to fields such as customer relationship management, professional services administration, business analytics and electronic commerce.
"The original vision is still extremely valid - middle market businesses match up well with the software vendors serving this market, but they lack an organization with the breadth and depth to support them on a national and global basis," Dunnigan said while in New York visiting clients a week after E-Partners announced his appointment.
He also said the ECS suit has been "resolved." Eisner officials confirmed the resolution, but declined to elaborate. Since that suit was filed, ECS and its principles left Eisner in a matter unrelated to the litigation.
Dunnigan said E-Partners’ expansion strategy would be focused on building out E-Partners’ existing infrastructure versus making acquisitions. He also said that the company might be inclined to add more software products to its offerings.
E-Partners’ offices around the United States handle software and infrastructure products from 20 vendors, including accounting systems by Best Software and Microsoft Business Solutions’ Great Plains and Solomon lines. Navision, an accounting/enterprise vendor recently acquired by Microsoft, appears to be the most likely new addition to E-Partners, but no deal is pending.
"We’re now ready for aggressive growth again," said Ken Eldredge, E-Partners’ executive vice president and Northeast regional manager. "David Dunnigan is sales-driven and growth-oriented; we should be turning a corner."
"We will look to grow organically with more of a market focus on niches and customer segments where our breadth and depth of expertise are compelling," Dunnigan said. "Rather than chase deals, we will do what it takes to meet customer needs."
Most immediately, that means expanding established niche technology and industry practices and a custom development group that designs software that meet specific needs of individual clients or industry segments. There will also be an increased focus on larger accounts, as E-Partners in January, created a "Major Accounts’ group to work with higher-profile end users and engagements valued at $1 million or better.
E-Partners’ custom development group has been particularly active in developing systems that manage logistical issues and manufacturing operations. Industry niche practices include the technology industry, healthcare and manufacturing.
Its accounting software vendors hailed E-Partners’ new strategy. It just so happens that E-Partners increased focus on vertical niches and on larger accounts are the same strategies being employed by Microsoft, Best and several other middle market accounting vendors.
"E-Partners is an excellent Best partner and they’re taking a number of great steps, said David Butler, president of Best Software’s Middle Market division. "We are optimistic about our growth together in the future."
Don Nelson, general manager of North American channels for
Microsoft Business Solutions, said, "We need E-partners to be successful and they need us to be successful."
Dunnigan has not ruled out going public, but noted that the market for IPOs is currently very weak. Reseller acquisition activity will continue, although it will not match the pace of the late 1990s.
"We will make acquisitions that make sense to us, but it won’t be like the 90s," he said. "We don’t have to rely on acquisitions to become a market force anymore."
E-Partners is indeed a market force.
It reports completing more than 11,000 middle-market implementations and serving more than 8,800 customers in 50 industries. It’s also a perennial top producer for Best and Microsoft.
Dunnigan said he may make reseller acquisitions to enter new markets, citing northern California, the Pacific Northwest, western Canada and Toronto as possibilities. He said wants to first focus on solidifying North American operations, and then expand reselling/consulting capabilities to Europe.
He is familiar with Europe; as senior vice president for customer operations at Austin, Texas-based Pervasive Software, he oversaw sales, support and professional service worldwide, which included a three-country region in Europe.
Before Pervasive, Dunnigan was a senior vice president for Novient Software, a developer of professional services automation technology, and worked with Aurum, a software developer that was acquired by high-end enterprise vendor Baan.
Dunnigan called E-Partners’ recent acquisition of Atlanta-based Merideus, "an opportunity to expand our customer base and gain a resource." E-Partners gets Merideus’s clients and Dominic Cristelli, former owner of Merideus, joins the consolidator’s sales team.
Where will the money for future deals come from?
"That’s not a concern because we have all the capital we need," Dunnigan said.
E-Partners is privately held and funded by venture capitalists that include its original investor Austin Ventures, and Capital Resource Partners and Texas Growth Fund. Dunnigan said one of the investors has increased its commitment to E-Partners, but added that the company’s revenue from operations is strong.
According to Dunnigan, E-Partners generated about $100 million in gross revenues last year. In 1999, while discussing the company’s IPO prospects, company officials said they were on track to reach $100 million in 2000.
The company’s founder and driving force through its start-up, Robert Dunikoski, remains chairman. He said, "It’s been a challenging time for the industry and we are excited about the changes that lie ahead. David Dunnigan has great market savvy."
Dunikoski, who was a regular at accounting industry functions and active with the accounting industry - led Information Technology Alliance, until 1999, when he ceded his chief executive responsibilities to Strifler. Dunnigan said he plans to make E-Partners "visible in the accounting industry,’ but he did not elaborate.
E-Partners may add additional software products to its mix, but it does not nave any deals working with any vendors. Dunnigan indicated that Navision, the Denmark-based accounting/ enterprise vendor recently acquired by Microsoft Business Solutions is a strong possibility.
He noted that Navision is part of the same Microsoft group that also handles Great Plains products, which have been a staple for E-Partners. Dunnigan, who became familiar with Navision products while working in Europe for Pervasive, noted that those fit well with the higher-end middle market and Fortune 1,000 type clients that E-Partners is now pursuing.
"We are seeing the beginnings of - if not an avalanche - a very good number of Fortune 1000 companies revisiting their decisions to put in large Tier One solutions (such as SAP, Baan or Oracle enterprise systems)," he said. "They see products from Microsoft and Best as a good fit and that’s where we can step in." E-Partners may add additional software products to its mix, but it does not nave any deals working with any vendors. Dunnigan indicated that Navision, the Denmark-based accounting/ enterprise vendor recently acquired by Microsoft Business Solutions is a strong possibility.
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