Enterprise software vendor Infor Global Solutions today said it will acquire workforce management software provider Workbrain Corp. for $227 million in cash.
The move marks the second time in just over a week that a publicly owned human capital management (HCM) software vendor announced it would be acquired with the help of an equity firm and taken private. On March 23, Kronos Inc. said it had accepted an acquisition offer of $1.8 billion from equity firm Hellman & Friedman Capital Partners VI, LP.
Workbrain, which offers software for time-and-attendance tracking, scheduling, absence management, and workforce planning, said its board of directors has approved the deal and that CEO David Ossip and company director Alon Ossip have agreed to vote their shares — representing about 22% of Workbrain's common shares — in favor of the deal with Infor. Workbrain said it expects the deal to close in June.
Toronto-based Workbrain becomes the latest in a series of acquisitions by privately owned Infor, which, with the help of equity partner Golden Gate Capital, has bought 19 software companies in the past four years, growing from a small, $35 million vendor of process manufacturing systems to the number three provider of enterprise applications — behind SAP and Oracle — with 70,000 customers.
Workbrain CEO Ossip, in a conference call with analysts, said the Infor deal grew out of an effort by Workbrain's board in the second half of last year to seek out "strategic alternatives." Following that review, which included solicitations of offers from Infor and other companies, the board decided that the company should continue as a stand-alone entity, Ossip said. However, as a result of ongoing negotiations with Infor, the companies eventually came to an agreement on an acquisition.
Ossip declined to say whether Workbrain had received other offers to be acquired.
Ossip said Workbrain will benefit from being able to cross sell its software to Infor's 70,000 customers.
The Workbrain and Kronos acquisitions come at a time when the market for workforce management software is picking up. The market for HCM software is expected to grow 10% per year through 2010, AMR Research estimates. And within the HCM space, sales of workforce management software of the type Workbrain sells are expected to grow by 16% annually through 2010, according to the research firm.
Manufacturing and distribution companies, in particular, are interested in workforce management software as a means of containing personnel costs, said Christa Degnan Manning, a research director at AMR Research, in an interview with Managing Automation.
A substantial part of Workbrain's business comes from manufacturing and distribution companies, said Degnan Manning, who noted that the company has manufacturing-centric modules, such as shop floor scheduling and time and attendance. Workbrain lists General Mills among its manufacturing customers.
At the same time, analysts note, vendors like Kronos and Workbrain are in need of capital to broaden their product offerings. In the long term, AMR's Degnan Manning said, workforce management and employee performance management are likely to be incorporated into core HR management systems, such as those offered by enterprise software vendors. That means vendors of such narrowly focused products will need to invest in broadening their offerings or merge with vendors that have broader offerings, she said.
Despite the expected rapid growth in the HCM and workforce management markets, however, Workbrain has recently lagged the market growth rate. In its most recent quarter, ended Dec. 31, 2006, Workbrain reported $24.9 million in revenue, up 4.4% from the fourth quarter of 2005. The company reported a $1.5 million net loss for the quarter. For the full year 2006, the company reported an 8.8% increase in revenue to $96.5 million, and a loss of $2.5 million. Workbrain blamed increased sales and marketing expenses, in part, for the loss.
Infor said it will pay $12.50 (CDN) for each of Workbrain's outstanding shares. The purchase price of $227 million equals about 2.35 times Workbrain's annual revenue. In a conference call with CEO Ossip and Infor Chairman and CEO Jim Schaper, financial analysts noted that the premium Infor is paying for Workbrain is less than that paid by Hellman & Friedman Capital Partners for Kronos, which is receiving about 3.1 times revenue.
Analysts on the call questioned whether Workbrain's directors had received a sufficiently high price for the company. Ossip noted that two financial firms, Merrill Lynch and Genuity Capital Markets, had reviewed the deal and given their opinion that the deal "was fair from a financial point of view," according to a company statement.
The Workbrain products will become the core of Infor's HCM offering, Schaper told analysts, although he said the company has not yet decided where Workbrain will fit organizationally. Infor will provide a detailed HCM strategic roadmap at a later date, Schaper said, noting that the company already has some HCM functionality from its acquisition of ERP vendors, such as GEAC.
In addition to integrating the Workbrain products with existing Infor offerings, Schaper said he expects the company to also sell the Workbrain software as a stand-alone, best-of-breed offering in much the same way that it sells asset management, supply chain, and performance management software.