Infor strikes again: acquire Mapics and takes it private

One of the largest enterprise software companies in the world, alongside acquisitive SSA, is about to be formed – by Infor Global Solutions. The company, bought last year by Agilisys and promptly renamed before buying lean ERP developer Lilly Software and then also supply chain planning systems firm Mercia Software last month, is now purchasing the legendary Mapics – and thus also the Syteline ERP range from the latter’s acquisition of Frontstep. The cash deal, which values Mapics at around $347m (based on $12.75 per share, just 10% above current value) and brings Infor’s total revenues up to about $600m, catapults Infor into the number four slot, just behind equally acquisitive SSA, with Oracle (now proud owner of PeopleSoft and thus also JD Edwards) at number two, and SAP, still the largest enterprise software provider on the planet. Privately held Infor – assuming Mapics’ shareholder agreement and the non-competition rubber stamp – will take publicly quoted Mapics off the market in Q2 this year, and into its discrete manufacturing group, headed by Robin Pederson, senior vice president of Infor. Multiple supply chain and ERP systems notwithstanding (and there are many to cope with here), the acquisition does make sense for both parties – and seemingly also for users. Infor, for example, lays claim to 73% of the automotive Tier One and Two suppliers market globally on the supply chain and trading partner management side especially, before its Mapics acquisition. With Mapics it gains ERP coverage in Tier Two and Three and beyond, and opens the door for further sales, and closely integrated co-developed software suites for would-be users. Add Lilly into that equation at the smaller end, and there’s near total coverage. Altogether, the deal means a user community of some 17,500 and coverage of some 70b countries. Geographically, the deal also extends Infor’s coverage, and the company gains Mapics entrenched and, it ahs to be said, successful VAR community around the world. And from an industry sector standpoint, industrial machinery companies, controls equipment and transportation equipment firms should all find themselves well served. As for existing users, Infor insists it will continue to support and indeed to develop all of its disparate ERP and supply chain systems. “We never sunset our customers’ systems,” says Rick Parker, Infor’s global vice president of marketing. “It’s very important that our customers know we will continue to support and enhance their systems as long as we can make money. And that means years.” He concedes that with so many systems that is a challenge, but rightly points to the considerable recurring maintenance revenue “from thousands of customers” to provide funding. Concerns around software vendors struggling to make sense of large numbers of ERP systems, markets and customers are inevitably real – and there’s plenty of history of underestimates. But there is a critical mass about this acquisition – similar perhaps only in that respect to Oracle’s capture of PeopleSoft. The sheer scale, value and understanding in the respective communities will make it work. Parker also points out that customers, existing and new, will now be offered a greater range of software to meet their manufacturing, business and supply chain needs. And he repeats that Infor’s integration goal revolves around development of its ‘World Edition’ suite, currently being developed on Java – the first module of which is out in the form of its Supply Web portal product, which is seeing take-up and good reception with automotive supply users. As for employees, there will be the inevitable restructuring. Parker cites financial and administration staff, though interestingly not developers and consultants – although with Mapics VAR community, the latter isn’t a big surprise. Looking to the future, consolidation, which has been a feature of the IT business for years, has gathered pace exactly as predicted. And Infor, like SSA, makes no secret of its desire to continue acquiring – in Infor’s case, with a stated strategy of going for companies in its chosen markets for dominance. “Infor is building vertical market leadership by assembling proven, best-of-breed solutions and deep industry knowledge,” says Jim Schaper, Infor’s CEO. Dick Cook, Mapics’ president and CEO, adds: “With the industry consolidation currently taking place, it was imperative that Mapics combine to create a larger company to help ensure the continued success of our customers. While our initial strategy was to grow through acquisition, the opportunity to be part of a much larger company while rewarding our shareholders presented an attractive alternative.” Which makes the picture for enterprise systems service across Europe in the future rather clearer, if bleaker for some. If Mapics felt the success with its iSeries and Syteline systems (which is not doubted – the company’s last stated revenue position was $172.8m) wasn’t going to provide the growth it needed, the writing is on the wall for other similarly geared ERP providers. With SAP at the top end slugging it out with Oracle, followed by SSA (mostly still focusing on its user base), IFS (largely aerospace and defence and with financial issues still) and Infor right across the mid market, plus Microsoft building from the bottom up, but also with an increasingly strong partner-led mid-market strategy, only the stronger of those serving SMEs, with excellent customer service and track records, and those with good vertical industry depth are going to last long. Infor’s acquisition of Mapics will be financed through equity capital from Golden Gate Capital and Summit Partners, Infor’s existing equity sponsors. Infor’s senior bank debt and subordinated debt will be refinanced by a syndicate of banks led by Lehman Brothers with Wells Fargo Foothill acting as syndication agent.