Industrial Distribution

Jack Keough

Activant to buy Prophet 21
August 18, 2005

The software consolidation beat goes on.

In a blockbuster deal, Activant Solutions is acquiring Prophet 21, one of the most well-known software companies in the wholesale distribution arena, for $215 million.  The transaction is expected to be completed in mid-September.

“This is a great fit for both companies,” said Chuck Boyle, president of Prophet 21. “We’re very excited about it. They’re a great company.” Boyle pointed out there wouldn’t be any changes within Prophet 21’s management or employee structure. He also indicated there could be further acquisitions ahead. “We’re not done yet,” he said.

With the combined resources of the two companies, “we will continue to deliver quality customer service and leading edge products,” Boyle added.

“This deal came together very rapidly in the past few weeks,” one industry source said, although talks have been going on for a few months.  

Ironically, Prophet 21, itself, has been one of the leading acquirers of other software companies in the past few years.

In 2003, Prophet 21 acquired Faspac and Systems Design and last year acquired Trade Service Systems, Dynamic Data Systems and Distributor Information Systems Corp. Two months ago, it acquired Stanpak Systems, a software supplier to the paper, safety, cleaning, and packaging industries. 

Activant has also been busy with acquisitions. It acquired Speedware Corp, which had earlier purchased Prelude Systems, a well-recognized company in the distribution sector.

In a prepared statement, Larry Jones, CEO of Activant said: “This latest acquisition is part of Activant’s ongoing growth strategy to become the premier provider of vertical business management solutions, serving small and medium-sized businesses. Prophet 21’s next-generation business management solution, Commerce Center, and e-commerce offering, Trading Partner Connect, give Activant a more comprehensive solution that deepens our market expertise and leadership in the wholesales distribution industry.”

Activant is basically divided into four businesses: automotive, hardware, lumber yards/building supply, and wholesale distribution. Activant had been seeking to expand its wholesale distribution business, and various sources said it made more sense to acquire Prophet 21 than to attempt to grow that sector organically. With the acquisition of Prophet 21, wholesale distribution could become its biggest division, with more than 4,000 customers. .

Prophet 21, founded in 1967, has worked with wholesale distributors in many verticals, such as fasteners, industrial, fluid power and many others. Prophet 21 also offers e-commerce services to simplify trading for distributors. Its Trading Partner Connect gives distributors an Internet trading network that streamlines the commerce process between distributors and their manufacturer/suppliers. In the first six months of 2005, purchase orders and invoices passed through Trading Partner Connect grew from $400 million to $1 billion, making it the fastest growing Internet trading network available to distributors. 

Jeff Gusdorf of Brown Smith and Wallace Consulting Group, a firm that closely follows the technology sector in wholesale distribution, sees additional acquisitions ahead. “If you don’t have a prominent name in the marketplace or a specific (product) niche, you’re a candidate for acquisition,” he said.

He also said there was a huge opportunity for software vendors to go after smaller distributors. He predicted that there would be “intense competition” for software vendors as they sell their products to distributors whose sales are more than $20 million.

Posted by Jack Keough on August 18, 2005 | Comments (1)