Infor Launches $1.8 Billion Bid For Lawson

Lawson Software confirmed late Friday that it has received an unsolicited bid from rival Infor and its venture capital partner Golden Gate Capital to acquire the company in an offer valued at $1.84 billion.

If approved, the deal would combine two of the smaller players in enterprise applications into a company approaching $3 billion in revenue. (By comparison, enterprise applications leader SAP had $17.6 billion in revenue in fiscal year 2010.) It would also make Infor itself a more attractive acquisition target.

Lawson said in a statement that its board has not determined whether it will sell the company, but it has hired financial advisor Barclays Capital to evaluate the proposal to acquire all outstanding shares for $11.25 per share. Lawson's shares on the Nasdaq exchange were up $1.50 from $10.00 per share Wednesday on rumors of the deal. The company's shares closed at $11.55 on Friday and quickly spiked close to $13.00 per share on Monday morning before settling back to $12.20.

Based in St. Paul, Minn., Lawson offers ERP, CRM and human capital management software and has more that 4,500 customers. The company had $736 million in revenue in 2010, down from $757 million in 2009 and a high of $852 million in 2008. In its statement, Lawson said it does not intend to comment further on the Infor/Golden Gate bid unless or until an agreement is reached.

With $1.8 billion in revenue, privately held Infor is an ERP, CRM and lifecycle management systems player that has acquired more than 20 applications vendors over the past decade, including Baan, GEAC Systems, Epiphany and Extensity. The Alpharetta, Ga.-based company has more than 70,000 customers, with 80% being midsize companies with $50 million to $1 billion in revenue.

Infor is led by Charles Phillips, who joined the company as CEO last October two weeks after resigning from Oracle, where he served as co-president for more than 7 years. Phillips is credited with spearheading a massive acquisitions spree at Oracle that netted applications vendors including Siebel, JD Edwards and PeopleSoft.

Infor has stuck with small, incremental acquisitions in recent years. It's last major deal was the $1.6 billion acquisition of SSA Global Technologies in 2006. The bid for Lawson would seem to mark a return to Infor's more boldly acquisitive ways. An Infor spokesperson could not be reached in time to comment on whether the bid for Lawson is a single, opportunistic deal or a return to Infor's boldly acquisitive strategy.

Adding Lawson would bolster Infor's software portfolio and customer base, although it would also introduce yet more overlaps to the already cluttered portfolio of legacy products supported by Infor.

As a larger company, Infor could better compete as an enterprise software company catering particularly to midsize companies, though that’s a segment where software-as-a-service (SaaS) vendors (including Salesforce.com, Microsoft, NetSuite and Workday) are seen as having the strongest growth prospects.

Infor and Lawson both earn almost all of their revenue on conventional software. But Infor does have services-based versions of its SyteLine ERP, asset management and expense management software. Lawson has cloud computing options including private-cloud delivery of its conventional software.

Phillips might be fattening up Infor's portfolio (and customer base) for an even larger suitor, such as his old employer, though a combination with Oracle might spark anti-trust scrutiny, as it would be a significant consolidation in the enterprise apps market.

A dark-horse suitor for Infor would be IBM, a company that has repeatedly said it's not interested in the apps market. But that was before Oracle acquired Sun Microsystems and started articulating its optimized systems strategy. IBM remains a leading integrator for SAP and Oracle applications. But Oracle Sun hardware and the Sun-powered Exadata Database Machine now go head to head with IBM offerings. Oracle has also promised to deliver Fusion applications as part of optimized systems.

Infor would give IBM applications it currently lacks that could be bundled with IBM hardware to create optimized systems. In fact, Infor has more than 14,000 customers running on IBM's System I (formerly AS400) hardware that would provide a ready-made beachhead for next-generation optimized systems.

The wrinkle in this analysis is that an IBM-Infor pairing would also compete against IBM partner SAP. But if optimized systems take off and SAP extends its partnership with HP, IBM might not be able to ignore the shifting market currents.

You might call this wild speculation, and any larger play will have to wait for the dust to settle on the current deal. But one thing is sure. An Infor acquisition of Lawson will be but the opening line of the next chapter on enterprise applications.