Exactly 6 weeks ago today (March 15th) I posted an entry highlighting Infor’s bid to acquire Lawson. At the time and for several weeks afterwards, there was much speculation about the price, whether or not there would be additional bidders, as well as the probability of Lawson staying independent. Shortly after this announcement, Harry Debes (CEO of Lawson) addressed a large flock of Lawson customers at CUE 2011 (CUE stands for customer user event) and acknowledged all the speculation as the “elephant in the room.” He said the company was considering all possible options, including staying independent.
I don’t think a lot of people put money on independence as the future outcome, but there did seem to be a lot that counted on other bids popping up… maybe not a real bidding war, but at least a second bid that might drive the proposed price higher. Why do I think this? Quite simply, the stock price went up. At the close on the Friday just before the weekend when the initial offer for $11.25 per share was made, the stock price had been $11.55. Instead of going down as a result of the bid, it continued to go up. Someone was betting they could turn a profit on prices between $11.55 and over $12 a share. I don’t profess to be a trading whiz, but I do know $11.25 is less than $12. And $11.25 will be what they get when the deal is sealed. There won’t be an opportunity to watch the stock go back up because it will no longer be on the market. Infor, at least for now, is a privately owned company. Indeed the offer is really being executed by GGC Software Holdings, Inc., an affiliate of Golden Gate Capital, which is one of Infor’s investors.
So, now that the deal is really going down, what does this mean to the customers and employees of both companies?
There is always a certain level of uncertainty concerning the workforce of any acquired company. Those in Lawson’s development organization should take heart in knowing that Infor already announced its intention to hire 400 additional software developers. So my guess would be that good developers are safe. Poor performers in any department should probably be looking over their shoulders as an acquisition is the perfect opportunity to clean house. Let’s just hope Infor is able to distinguish the good employees from the underperformers. No offense intended, but that distinction is often much harder to make than it would appear to be. And in any acquisition, there will be some level of redundancy, particularly in the back office.
What about the impact on customers? My initial take is that the customers from both camps will benefit directly from this move. There will be more innovation and I hope this provides some impetus for some rationalization and cross fertilization of product lines because Infor’s reputation and brand has suffered as a result of having too many.
In an open letter to Infor and Lawson customers, partners and employees, Charles Phillips, newly appointed CEO of Infor, highlighted several benefits to the deal, which also imply some plans. In fact he even starts out by saying, “Lawson customers can rest assured: Product investment, innovation and customer success will be our key areas of focus” and references Infor’s previously announced plans for accelerated innovation, including those 400 developers he intends to add.
In this letter he highlights the following points:
4 Complete ERP suite: As the boundaries of ERP continue to be stretched, the top ERP contenders continue to expand their footprints. Mr Phillips references Lawson’s enterprise financials and human resources products as standalone products, across multiple industries and the intent to integrate them with Infor’s manufacturing, supply chain, workforce, and asset management products. I “get” the reference to human resources as Lawson has developed this area further than Infor has, but Infor has financial management products that are available as stand-alone products as well, so the implication I see might be a rationalization of products, with Lawson’s S3 forming the basis over the SunSystems or Masterpiece product lines? But just cross-selling independent extensions to ERP without truly integrating them doesn’t get you a “complete suite.” So there is some real work to be done here.
4 Complementary products: Mr Phillips states, “The product lines are complementary, not overlapping.” Complementary yes, but I diagree...they are also overlapping. Consider the financial product I mention above and Lawson M3 competes directly with several of the Infor ERP solutions for manufacturing. But I will say that Lawson has stuck to its knitting in terms of declared verticals. This means there is less overlap, but there is still a lot. However, the example Mr Phillips uses: ”… Lawson’s expertise in the healthcare industry will be enhanced by Infor’s Enterprise Asset Management which will be targeted for large hospitals and Time & Attendance product, complementing Lawson’s Nurse Scheduling application. This is truly a scenario where 1+1=3.” But don’t forget Lawson also has an EAM solution.
4 Standards-based integration: Infor’s underlying architectural strategy has undergone some changes over the past year, and appears to still be transforming itself somewhat, but the path seems to be towards openness and a commitment to stay out of the middleware market. This will pave the way for integrating the two new product lines with other Infor product lines.
4 Re-inventing the applications experience: Both Infor Workspace and Lawson Mashup Designer have similar goals here. It will be interesting to see if and how these two separate products are rationalized.
The remaining points refer to expertise in key industries (of which neither company lacks in both complementary and overlapping industries), innovation and investment (as evidenced by prior announcements and growth plans for R&D) and scale. In terms of scale, Mr Phillips makes reference to 75,000 customers and concludes with, “Having more customers allows us to invest more, identify more requirements and develop a large partner ecosystem.” I agree with the premise, but Infor already claimed to have 70,000 customers, so I am a little puzzled by such a small (7%) increment.
I do believe Lawson customers in particular will benefit from the increased focus on innovation. While Lawson has indeed brought innovation to the table, even as revenues were down during the recession, its profitability stayed strong, which was commendable for a public company with an obligation to its shareholders. But it also limited its investment.
My conclusion… while I hate to see the number of distinct and competing ERP vendors shrink once again, I believe that if the combined companies are not afraid to make some bold steps to consolidate strategies, perhaps rationalizing product sets, the customers will be the clear winners.