CASE STUDY: EPIC ADVISORS, INC.

Client Profile:
EPIC Advisors, DELIVERING WHAT TODAY'S 401(k) WORK FORCE WANTS

EPIC has gained a national reputation as a leader in providing custom 401(k) retirement plan programs to employers and financial institutions. The firm specializes in participant-directed plans, primarily using daily valuation recordkeeping. EPIC serves as recordkeeper for more than 720 retirement plans, and supports individual employer-sponsored plans and institutional partners in some 29 states.

Founded in 1993 and headquartered in downtown Rochester, New York, EPIC is now led by Robert F. Judd, President, and James M. Genthner, Executive Vice President.

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EPIC's opportunity: It's time to grow
Some eleven years after its establishment, EPIC found itself in the enviable position of gready to grow." Company leaders had been approached over the years by interested buyers, but now the timing—from a personal as well as marketplace perspective—seemed right.

"EFP Group had been our accountants for a number of years, for day-to-day accounting and tax returns, but also had helped us with our SAS 70 process," explains EPIC president Bob Judd. "When Lou Camarella indicated that EFP had merger and acquisition functionality in-house, it seemed like a good solution to leverage the relationship we already had."

Camarella, a partner at EFP Group, heads the Valuation, Litigation & Forensic Services Group. He and Kurt Litzelfelner, a senior valuation analyst in the group with previous M&A experience, had a long history with Judd, Genthner and the other owners of EPIC. "There were no surprises for us, either on the books at EPIC, or in the intentions of the leadership," Camarella says. "We knew exactly what they were trying to achieve."

Setting the stage: partnerships that advance the client's interest
Business owners looking for a merger, sale or acquisition face a number of options. They can manage the process themselves, fielding phone calls, putting out feelers. They can rely on an attorney to help them manage the risk. They can turn to their accountant, who may or may not have experience in M&A work. They can seek out the services of an investment banker.

"We believe," says EFP's Litzelfelner, "that the optimum solution is to combine the skills and knowledge of an accounting firm that has M&A expertise with the specialized advantages of an investment banking firm. Clients get the full range of strategic and tactical help they need."

Judd concurs. "One of the advantages of having the accounting firm tie in is, they know you already. They have a familiarity with who you are as well as the financial background of the company. But also, this kind of deal is really a mix of the investment banking side and the presentation of financials. Your accountants are going to be involved one way or the other so to combine the two parties is a solid benefit."

For the EPIC sale, EFP Group brought in a regional investment banking firm. The firm serves middle-market companies who, although they have the same demanding needs of larger companies, may find it difficult to access
a larger investment banking firm.

"We found all of the people involved to be just great," says Judd.

A systematic process: yields the best price, best terms, best buyer
"There are different types of sales," explains EFP's Camarella, "and it's critical to choose the best model for each client. In EPIC's case, we chose a limited or targeted auction, where we invited bids from a select group of candidates. This approach allowed EPIC to maintain a high level of confidentiality while still attracting a significant level of competition."

The next step, says Litzelfelner, is to put a systematic process into place. "There are a number of essential phases," he says, "running from initial due diligence and valuation all the way to the closing process. Team members from EFP Group and the investment banking firm prepare an offering memorandum that details the case for the sale, research and recommend potential buyers, obtain indications of interest and letters of intent, prepare a 'data room' where interested parties can conduct due diligence, negotiate a definitive purchase agreement, and coordinate legal, accounting and other issues leading up to the closing."

"The average person," says Judd, "would be clueless about what goes into this. What are the elements that make a good deal or a bad deal? You need to focus on the legal representations and warranties in addition to the financial aspects. Just defining what is being sold and what is not is a process in itself. And the presentation, you can't forget that—the written offer book, the discussion. This process worked. It certainly allows you to keep the business going during the M&A timeframe. That's critical, when it's time to close you want a company worth at least as much as when you started the process. You have to remember it's not going to happen overnight. Ours took six months, and that was fast."

Result: happy parties on both sides of the table
That systematic process generally leads to more interest than would be uncovered otherwise. "Although we can never guarantee how the relationship will unfold, we bring clients choices, "Camarella says. "They can weigh the synergies and advantages—one buyer might bring you more products, another might offer more money but require you to close your office or terminate employees, another might require relocation, another might offer a ready sales force and marketing support, and still another might offer a good cultural fit."

"We came to a point where we had four interested parties," says Judd. "It became a bit of a horse race, which is of course what you want. This is where the price went up substantially, and the terms improved. Once you have everyone arriving at similar numbers, then the advantage goes to employees, and to clients."

The winning bid came from NBT Bancorp of Norwich, New York.

"We were able to get what we wanted with the shortest time and best terms and, maybe most importantly in this case, we were able to retain 100 percent of our employees," says Judd. "There was no reduction in our staff. And we continue to do business as EPIC Advisors. This was the best possible deal for our clients."

What counts: enhancing reputations and relationships
While it was important for EPIC to get the best possible deal, it was also critical to maintain a fair, respectful process.

"These were people," Judd says of the potential buyers, "who we were going to work with or compete against in the future. We were not interested in creating enemies. I think you have to be very cautious about losing a sense of fairness, and that comes from communicating exactly what the process is and following it. If people feel they're being played, it hurts you in the market. There was a high level of respect for that in our case—both on our part and on the part of EFP Group and the investment banking firm."

NBT Bancorp, Judd says, took notice. "They've said that they felt they were treated extremely well throughout the process and the negotiation. They felt the relationship and the discussion were amicable."

"These deals consist of people, not numbers," says EFP's Camarella. "We begin these processes with a deep understanding of our clients' personal as well as financial objectives, and we keep both considerations at the forefront all the way through."

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