Epiq Systems to Accelerate Growth of eDiscovery Managed Services Offering with Acquisition of Iris Data Services

Thursday, April 9, 2015 - 10:21

Epiq Systems, Inc., a leading global provider of integrated technology solutions for the legal profession, has announced 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. 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.

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 percent to $38 million in 2014 from $25 million in 2013, while 2014 adjusted EBITDA grew 42 percent 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.”