News Analysis: Infor Extends $1.84B Unsolicited Offer For Lawson

Published on March 14, 2011 by R "Ray" Wang

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 execute another acquisition or seek another partner other than Infor.  This scenario will depend on board relationships among the merger brokers of Soros, Icahn, and Wadhwani.  Financial gains will drive this outcome as other bidders emerge and board members determine the best outcome in their self-interests.

The Bottom Line: Clients Should Stay Tuned But Not Be Concerned

Acquiring companies have mature mergers and acquisition processes.  No organization would want to pay a tidy sum for an organization and lose the acquiring customer base.  Customers can expect the R&D, service and support, and sales teams to mostly remain in tact during  merger or acquisition.  However, clients and prospects should take the following actions in light of an acquisition:

  • Review existing contracts and lock-in beneficial terms and conditions. Have your contract reviewed and identify areas where you may have a special arrangement.  Work with Lawson to begin an early renewal in the maintenance contracts to secure terms for the next 3 to 5 years.
  • Revisit the overall apps strategy. Now is the time to understand both the Lawson and Infor road maps as they apply to apps strategy.  Determine how a shift to a Microsoft tech stack, a cloud deployment, or continued i-Series investment will play out.
  • Identify key Lawson contacts and resources. Let the Lawson team know the valued contacts in the organization.  This will assist Lawson and Infor in determining which staff to keep should a merger go through.
  • Attend CUE. CUE is Lawson’s major user event and conference.  If you haven’t registered, please do so now.  Secure your relationships with other users and the Lawson management team.  Expect more information to come first hand at the event.

Your POV.

Does this announcement surprise you?  Are you a Lawson customer?  What do you think of an Infor takeover?  What do you hope Lawson will do? Add your comments to the blog or reach me via email: R (at) ConstellationRG (dot) com or R (at) SoftwareInsider (dot) com.

How can we assist?

Buyers, do you need help with your apps strategy and vendor management strategy?  Trying to figure out how to infuse innovation into your tech strategy? Ready to put the expertise of over 1000 software contract negotiations to work?  Give us a call!

Please let us know if you need help with your next gen apps strategy efforts. Here’s how we can help:

  • Providing contract negotiations and software licensing support
  • Evaluating SaaS/Cloud options
  • Assessing apps strategies (e.g. single instance, two-tier ERP, upgrade, custom dev, packaged deployments”
  • Designing innovation into end to end processes and systems
  • Comparing SaaS/Cloud integration strategies
  • Assisting with legacy ERP migration
  • Engaging in an SCRM strategy
  • Planning upgrades and migration
  • Performing vendor selection

Related Resources

20101025 A Software Insider’s Point Of View – R “Ray” Wang – “News Analysis: Charles Phillips Takes Over As CEO Of Infor”

20100422 A Software Insider’s Point of View – R ” Ray” Wang – “News Analysis: Lawson Puts Its Full ERP Suite Into The Cloud”

20090425 A Software Insider’s Point of View – R “Ray” Wang ” Event Report: Lawson Cue09″

20090313 A Software Insider’s Point of View – R “Ray” Wang “Friday’s Feature: Snapshots in Enterprise 2.0 UI/UX – Lawson Smart Office

Related Links

20110311 IDC News Service – Chris Kanaracus “Infor Makes Unsolicited $1.84B Bid For ERP Vendor Lawson”

20110314 Managing Automation – Chris Chiapinelli “ERP Shakeup: Infor Bids 1.8B To Acquire Lawson”

Reprints

Reprints can be purchased through Constellation Research, Inc. To request official reprints in PDF format, please contact sales (at) ConstellationRG (dot) com.

Disclosure

Although we work closely with many mega software vendors, we want you to trust us. For the full disclosure policy, stay tuned for the full client list on the Constellation Research website.

Copyright © 2011 R Wang and Insider Associates, LLC All rights reserved.

  • Chuck – very true. who do you think would be a better suitor for Lawson? Oracle or Infor? – Ray

  • Chuck – thanks for your POV. We’re seeing both vendors move to adopting parts of the Microsoft Stack. Should be interesting to see what materializes before CUE. -Ray

  • Lawson has never been a leader in technology adoption, instead taking a more conservative route and applying the lessons learned from others. Unfortunatley, they’ve also been slow in architectural issues which have impaired global capabilities such as languages.

    Nonetheless, Lawson is a great company with a solid product and can teach many of its competitors a lesson on achieving successful customer experiences.

    Infor’s making a good move, and Phillips is taking a page right out of his former bosses playbook.

  • Vincent – I agree. M3 should have done better in the NA market. I would suspect that they did not invest in the right team to make this successful. What do others think? – Ray

  • It is not surprising that S3 did not make it outside of the US, dependind on the fact that it is ‘hard coded’ in english/american. No translation possible ! On the other side, I would have think that M3 may gain traction out of its traditional market.

  • Investment bankers, argue a billion dollars / 15 pct margins, to fund the R&D transition from client server to cloud generation, Lawson reported $745.12M / 3 pct profit.

    Charles Phillips wins this one.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Related Posts