Epiq Systems has been acquired for around $1bn by OMERS Private Equity and Harvest Partners following almost two years of shareholder activism that in 2014 saw Epiq appoint Credit Suisse Securities to help review its strategic options.
The listed Kansas City-headquartered eDiscovery provider, which saw its first quarter 2016 net income drop thanks in part to its acquisition of Iris Data Services last year, will be combined with legal process outsourcing and litigation services giant DTI, a private company majority-owned by OMERS and managed by OMERS Private Equity.
The acquisition, which subject to receiving approvals will give the combined entity an expanded geographical footprint and deeper bench of expertise, follows wider consolidation in the eDiscovery market, amid a growing demand among clients for global eDiscovery capability and cost efficiencies.
In January 2016, Advanced Discovery furthered its global footprint with the transatlantic acquisition of Millnet, while in the same month Xact Data Discovery expanded its US coverage by taking over Salt Lake City-based Orange Legal Technologies and Everlaw closed an $8.1m series A funding round led by Silicon Valley fund Andreessen Horowitz. In May, Xact Data Discovery added to its portfolio with the acquisition of San Francisco-based F1 Discovery, while TCDI acquired Cleveland-based JURINNOV.
Epiq has long been the subject of shareholder activism and in September 2014 its two biggest shareholders – hedge fund P2 Capital and investment manager St. Denis J. Villere & Co. urged it to “consider strategic alternatives for the company including taking it private” amid complaints over shareholder value.
Epiq’s 2016 first quarter net income dropped by $1.8m to a net loss of $0.1m compared to a net income of $1.7m in the same quarter of 2015, thanks in part to the $1.2m it spent on acquiring Iris Data Services in 2015. The company also said the drop related to “an expense increase of $1.3m related to Epiq’s ongoing review of strategic and financial alternatives.”
Douglas M. Gaston, the chairman of the strategic alternatives committee of the Epiq board of directors, said of the acquisition by OMERS: “This transaction represents the successful culmination of a comprehensive review of strategic and financial alternatives to maximize value for all of Epiq’s shareholders. After careful consideration, the board determined that this transaction with OMERS Private Equity and Harvest Partners represents the highest and best offer received, offering Epiq shareholders at closing with immediate cash value at a substantial premium.”
Eric Haley, managing director of OMERS Private Equity, added: “Epiq and DTI are both recognized as excellent service providers and market innovators. This combination will produce a global firm with best-in-class solutions and significant opportunities for growth in the dynamic legal technology industry.”
Epiq was advised by Kirkland & Ellis, while DTI was advised by Weil, Gotshal & Manges and Bryan Cave. Weil Gotshal advised OMERS Private Equity and White & Case advised Harvest Partners.