Kansas City, KS – Epiq Systems, Inc. (NASDAQ: EPIQ), a leading global provider of integrated technology solutions for the legal profession, announced today that the company has signed a definitive agreement to acquire privately-held, Kansas City-based Iris Data Services, the market leading provider of managed services for electronic discovery (eDiscovery). The total consideration for the acquisition is $134 million, subject to certain post-closing adjustments, which would be funded with existing cash and borrowings from the Company’s credit facility. The acquisition is expected to close on or about April 30, 2015, subject to the satisfaction of closing conditions, be modestly accretive to Epiq’s 2015 results and provide a post-closing tax benefit to Epiq of approximately $23 million. Epiq will host a conference call to review the transaction today at 11:00 a.m. ET, the details of which are below.
The Iris acquisition significantly accelerates Epiq’s strategic plan to offer managed services solutions to its existing global client base, while bringing Epiq’s expansive eDiscovery and document review resources to a new client base. Iris President and co-founder Major Baisden will join Epiq as managing director and will continue leading Iris’s operations.
Managed services is an outsourced eDiscovery solution for an entire organization, rather than for a single project. Responding to a growing market need for price certainty and self-service, Iris created an innovative eDiscovery managed services offering. Iris’s platform, one of the first of its kind, delivers best of breed third-party technology integrated with its proprietary workflow, storage, security and evidence management software.
Managed services engagements typically involve multi-year contracts and recurring revenue streams. With over 22 multi-year deals signed in the last 12 months alone, Iris has established itself as the leader in eDiscovery managed services. The swift rise in Iris’s operating revenue and adjusted EBITDA is evidence the legal industry is embracing the managed services model. Iris’s operating revenue grew 52% to $38 million in 2014 from $25 million in 2013, while 2014 adjusted EBITDA grew 42% to $8.2 million compared to $5.8 million in 2013.
“The acquisition of Iris is a significant milestone in our growth strategy. Iris complements our core transactional eDiscovery business and supplements it with an impressive team and a range of new capabilities. We expect this transaction to yield numerous cross-selling opportunities between Epiq’s clients and the substantial base of new clients that we expect will augment our long-term growth,” said Tom W. Olofson, chairman and CEO of Epiq Systems. “Increasingly, our clients want solutions to help them better manage eDiscovery costs and improve their operational effectiveness. Iris’s compelling offering accelerates our ability to address this client need in managed services, an area we had previously targeted as an important growth opportunity. Equally important, the acquisition is a big win for our shareholders as it provides additional long-term growth potential along with a near term bottom-line contribution.”
“Iris and Epiq share entrepreneurial cultures and a commitment to delivering the highest level of client service. This is a great opportunity for Iris to expand its potential by joining the preeminent global eDiscovery leader and a like-minded organization,” Mr. Baisden said. “Our combined client base will reap the full benefits of a robust eDiscovery platform combined with a pioneering managed services offering, as well as access to Epiq’s industry leading capabilities in bankruptcy and class action and mass tort settlement administration.”
The proposed acquisition is subject to customary closing conditions. Epiq was advised in this transaction by KeyBanc Capital Markets and Sidley Austin LLP.
Epiq and its Board of Directors remain committed to conducting a separate process to explore a full range of strategic and financial alternatives with Credit Suisse Securities as financial advisor and Kirkland Ellis LLP as legal advisor.
2015 Financial Guidance
Epiq’s previously announced 2015 financial guidance remains unchanged at this time. Epiq estimates that operating revenue for 2015 will be between $465 million and $485 million, adjusted EBITDA between $103 million and $109 million, and adjusted EPS between $0.86 and $0.92. This guidance includes a number of assumptions based on current facts and expectations, which are subject to change.
Investor Conference Call Information:
Epiq will hold a conference call today at 11 a.m. ET to discuss the details of the acquisition.
Call Dial in: (877) 303-6311 or (631) 813-4730
Webcast URL: http://www.epiqsystems.com/investors/corporate-overview/
Audio replay: (855) 859-2056, ID# 21511378, available through April 15, 2015
Iris Data Services is the leader in eDiscovery managed services — no other provider has more clients, experience or focus. Iris’s suite of products includes HorizonSM, managed services processing that seamlessly integrates best-in-class applications, and ArcSM, a private Relativity® environment for a fixed monthly fee. Iris’s U.S. headquarters is in Kansas City and its European headquarters is in London. Iris provides global services through office locations in the United States, Europe, India and China. For more information about Iris, visit www.irisds.com.
About Epiq Systems
Epiq Systems is a leading global provider of integrated technology solutions for the legal profession, including electronic discovery, bankruptcy, and class action and mass tort administration. We also offer full-service capabilities to support litigation, investigations, financial transactions, regulatory compliance and other legal matters. Our innovative technology and services, deep subject-matter expertise and global presence spanning 45 countries served from 20 locations allow us to provide secure, reliable solutions to the worldwide legal community. Visit us at www.epiqsystems.com.
Chris Eddy/David Collins