Management buyout to take Prophet 21 private

Prophet 21, Inc., Yardley, PA, provider of business technology software and services to the durable goods distribution market, has entered into an agreement for management to buy the company and take it private. The $70-million cash deal will effectively buy out the company founders, John and Dorothy Meggitt (51.2% shareholders), and give the current management team more flexibility, as Prophet 21 is currently publicly held.

The company will go private through a merger agreement with an entity formed by Thoma Cressey Equity Partners Inc., Chicago, IL, and LLR Partners Inc., Philadelphia, PA. All of the issued and outstanding shares of common stock and options of Prophet 21 will be acquired for cash in the amount of $16.30 per share. Prophet 21 management will continue to operate the business under its current name and operating structure. The merger is expected to close in the first calendar quarter of 2003.

The investment groups backing the management buyout focus on mature companies with strong growth potential, according to Doug Levin, executive vice president. 'This is a win for customers and the company going forward,' Levin said. 'It gives the management team that's been in place for nine years a personal stake in the company.

They are ready to grow the company. Our customers will benefit as we'll have more flexibility to pursue the right growth options. Taking the company private will lower costs associated with being a public company, and allow us to focus more on long-term growth rather than quarterly results.'

The deal shifts the focus of the company, but doesn't change the direction, Levin noted. It's a generational transition for the company, as the Meggitts, who founded the company in 1967, were more focused on appreciation, rather than growth, Levin said.

'We believe Prophet 21 is very well positioned due to its leadership in the industry, domain expertise and innovative product offering,' said Orlando Bravo, a partner with Thoma Cressey Equity Partners. 'This transaction fits well with our strategy of buying strong franchises in large and fragmented industries. We are excited to be partnering with Prophet 21's proven management team to continue to build the business.'

'This transaction brings to Prophet 21 the opportunity to move forward more aggressively, to fully leverage our brand equity, leading technology offerings, and market penetration,' said Chuck Boyle, Prophet 21's president and CEO. 'The management team will own a substantial interest in the business going forward. We are excited to continue to build the business with the financial backing and business expertise of Thoma Cressey Equity Partners and LLR Partners. Their support of Prophet 21 is a powerful endorsement of our business potential.'

Thoma Cressey Equity Partners (TCEP) is a private equity firm, with a 25-year track record of backing management teams in buyouts, recapitalizations and growth equity transactions. Through its seven funds, TCEP has led over 80 transactions in a wide range of industries. With offices in Chicago and San Francisco, TCEP currently manages over $1.0 billion in private equity capital. TCEP typically invests $10 million to $100 million in businesses valued between $30 million and $300 million. The firm focuses on investments in Business Services, Information Technology, Healthcare and other high growth industries. Investors in TCEP funds include some of the leading government and corporate pension plans, financial institutions, university endowments and national foundations. More information about TCEP can be found at www.thomacressey.com.

LLR Partners Inc. is a $260 million private equity firm providing capital to companies with strong growth potential, proven business models and outstanding management teams. LLR primarily makes investments of $10 million to $25 million in a broad range of growth industries, with an emphasis on business services and information technology.

Prophet 21 offers enterprise software solutions for Windows and UNIX, with more than 2,000 customers. Revenues for the fiscal year ended Jun. 30, 2002 were $43.5 million, as compared to $40.8 million for the prior fiscal year. Net income for the fiscal year was $2.6 million as compared to a loss of $2.2 million for the prior fiscal year. Revenues for the fourth quarter of fiscal 2002 were $11.8 million, compared to $10.8 million reported during the same quarter in fiscal 2001. Net income for the quarter was $1.1 million as compared to a loss of $0.5 million during the same period a year ago.