Unsolicited Offer Marks Chuck Phillips’ First Acquisition Attempt At Infor
On March 11th, St.Paul, MN, based Lawson announced that Infor and Golden Gate Capital made a $1.84B unsolicited offer. This comes after the March 8th news that Lawson retained Barclays Bank to evaluate options. An acquisition by Infor (the 3rd largest ERP vendor) and Lawson (the 6th largest ERP vendor) could result in:
- New revenue streams for Infor. As with Lawson, Infor’s revenue mix heavily relies on maintenance revenue. Despite high estimated retention rates in the 95% range, its estimated that Infor has not successfully grown new license revenue at a rate and pace to keep up with retention losses. Infor must find new revenue sources to grow and cover its debt obligations while preparing for an anticipated IPO.
Point of View (POV): Lawson’s S3 offerings in human capital management (HCM) software, public sector, and healthcare provide the drivers for growth. Infor’s lack of a full HCM suite provides many opportunities for a cross-sell Lawson HCM and build on Infor’s Workbrain customer base. Infor’s Hansen public sector offering will deliver good cross-sell opportunities with Lawson’s Public Sector HCM and Financials offering. Healthcare will deliver overall incremental revenue growth.
- Long term economies of scale for Lawson customers. Lawson earned $736.4M in revenues in 2010. Lawson’s acquisition of Intentia in 2006 was long and hard but provided a global presence and some economies of scale, especially in R&D. Lawson gained better user experience and a more complete offering through the M3 products. In general, the acquisition placed Lawson into the Top 10 of ERP vendors by revenue and was seen as successful. However, cross-sell opportunities did not materialize as intended in the North American market for M3 and for EMEA in S3. On the positive side, Lawson’s new distribution product resulted in big deals in a very under served market and created growth synergies between S3 and M3.
(POV): From a size and scale perspective Infor will provide significant scale for Lawson customers. As with the Intentia acquisition, scale could come from the R&D side of the house and of course back office efficiencies. Given the need to support a large maintenance revenue base, customers can expect continued investment in service, support, sales, and product. No acquiring vendor would be foolish enough to kill these areas. Both Infor and Lawson have made steps to adopt Microsoft .NET platforms and coordinated efforts in R&D should provide the necessary scale to advance the technology across the product lines.
Unsolicited Offer No More Than An Opening Bid
Many questions remain unanswered on how Lawson will receive this opening bid. However, stakeholders can expect the following outcomes to occur:
- Infor to raise the bid. Competing bids and counter bids will emerge. Oracle and IBM remain potential candidates for counteroffers. Oracle values Lawson’s reach in public sector and healthcare. IBM may feel vested to protect its i-Series base from further aggregation by Infor and commoditization by Microsoft.. Bids from other private equity firms may arise given the low opening offer. Major friendly share holders still include members of the Lawson family which hold almost 30% of the company.
- Lawson to remain independent. Lawson’s CEO Harry Debes has shown amazing competence in turning the company around from the previous CEOs failings and executed on a fairly successful acquisition. Debes grew the business amidst a financial meltdown and put in changes that will take Lawson to the next level. Lawson does not need a merger to survive. The board can say no and the company will be fine.
- Alternatives by Lawson. The Lawson board could …