PhillyDeals: EPAM Systems buys Conshohocken's Empathy Lab

EPAM Systems Inc., the fast-growing Newtown-based company that outsources software projects for Aramark, Barclays, Coca-Cola, Google, Oracle, and other big firms to its 7,000 engineers at centers in the former Soviet Union and other countries, has been plowing cash into North American acquisitions since its February initial public stock offering on the New York Stock Exchange.

Chief executive Arkadiy Dobkin said Tuesday that his firm had acquired Conshohocken-based Empathy Lab L.L.C., an 85-person, seven-year-old digital advertising firm that has done jobs for AIG, Comcast (and its NBCUniversal arm), MetroPCS, Pep Boys, and TJMaxx, among others.

EPAM won't say what it paid for Empathy, headed by Kevin Labick. EPAM paid $17 million for Toronto-based software consultant Thoughtcorp in May. The firm is weighing other deals, Dobkin added.

"Our clients are very hungry for these types of services," he told me. According to the company's financial reports, EPAM sales rose 50 percent in 2010 and again in 2011, and are up around 25 percent so far this year. The company says 2012 billings should top $420 million. Analysts estimate profits above $50 million.

More than half of EPAM's business "relates to helping our clients with transferring to new digital platforms and to the cloud," Dobkin said. Now EPAM can sell to Empathy's customers, and vice versa.

As part of EPAM, Empathy will hire "20, 30 people a year," Dobkin said. They will include designers, engineers, programmers, project managers, account managers, and business analysts. EPAM employs about 350 in the United States, about half of them in the Philadelphia area.

"It's difficult to find good people all around the globe," Dobkin added. "That would be true in New York and Silicon Valley as well as the Philadelphia area and internationally."

Dobkin is a native of Belarus. He cofounded EPAM in 1991. EPAM is 40 percent owned by Russia Partners, an investment group owned by New York-based Siguler & Guff. The Fidelity mutual fund group and Dobkin are also major EPAM shareholders.

The New Jersey Senate is "very likely" to pass the House's online-gambling bill this week, though Gov. Christie's final approval is less certain, writes Brian McGill, gambling analyst at Janney Capital Markets, in a report to clients.

The law would allow all of the gambling that is legal at casinos in Atlantic City. It would also guarantee profit margins above 50 percent to gambling company owners, give the state a 10 percent cut - and limit bet management to firms with servers in Atlantic City, such as the Borgata and other casinos, McGill told clients in a report.

Industry studies claim "the U.S. could be a $35 billion market," including $1 billion in New Jersey, "if all online gaming was allowed," McGill said.

If Christie approves, other states are likely to copy. Online betting could become so ubiquitous, McGill added, that it might distract bettors away from state lottery machines.

Industrial-tool maker SPX Corp., of Charlotte, N.C., has been trying to raise $4.2 billion to buy Wayne-based industrial pump-maker Gardner Denver, according to Reuters.

Past CEO Barry Pennypacker moved Gardner Denver here from Quincy, Ill., two years ago because he wanted to be closer to customers. But he left last summer as activist investor ValueAct Capital started accumulating shares. The board then brought in Michael M. Larsen, a veteran of Trevose-based GE Water, and has been seeking sale offers.