A financial services outsourcing company, which was created two months ago with support from an Indian venture capital firm, doubled in size Monday after completing its first acquisition.
Ephinay purchased Phoenix-based Core3 for an undisclosed sum and will use the operation as a West Coast service center for its clients, says President and Chief Executive Michael Gantt. The company already has a service center outside Delhi, India.
The company – its name is pronounced “F and A” to reflect the finance and accounting industry – handles all back-office accounting functions for clients, from billing for receivables to reconciling statements and preparing financial reports for filing with the Securities and Exchange Commission and other regulatory agencies.
Ephinay was formed after India-based Chrys Capital recruited former executives of GE Capital’s accounting outsource business, and Chrys pumped $10 million into the company in February when it signed its first client, a Fortune 50 company that Gantt declines to identify.
The company placed its headquarters in Charlotte because it has a major airline hub that offers nonstop flights to London and Frankfurt, Germany, two main connecting points for flights to India, and because Gantt lives outside Columbia, S.C.
The fact that the Queen City also is one of the leading financial centers in the United States also doesn’t hurt, he says, adding that the company is talking with local economic development officials about locating a service center in the area as well.
Accounting focus important
Ephinay, which now has about 60 employees, will continue to seek acquisitions as well as strive for internal growth, Gantt says. He notes that also was the strategy at Fiserv, a provider of IT and other services to the financial services industry, where he worked before joining Ephinay early this year.
“This is an emerging industry, and we aspire to a leadership position in it,” he says, noting clients can cut costs by 20 to 30 percent and get higher quality work by outsourcing their accounting and finance work – a selling point that has become more critical following the financial scandals that plagued Enron, WorldCom and others.
“At most companies, (accounting) is not the main thing they do, and it’s not where the future leadership of the company is cultivated,” he says. “This is our core competency, and we focus on providing the best service.”
Ephinay will look at acquisitions where the target firm not only has a solid roster of clients but also can offer geographic diversity, so it can scatter service centers around the globe, Gantt says.
The Core3 deal fits that bill by bringing four more clients, from a dry cleaning industry consolidator to a real estate developer, the Phoenix service center and some proprietary technology, to Ephinay. Chrys brought the two firms together after Core3 approached the venture firm about providing growth capital, Gantt says.
People as important as technology
Although Ephinay has a bit of proprietary software, it isn’t central to its operations, he says. The company is “platform agnostic,” using various IT systems to help clients with different needs, he says.
“A lot of companies have tried to impose one solution on clients, and we think that is a failed strategy,” he says. “Our business is heavily involved with technology, but we believe people are just as important.”
For example, he says the Ephinay service center outside Delhi is populated not by software developers, as is the case with many other U.S. company operations in the area, but by chartered accountants, which are the Indian equivalent of CPAs.
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