In a bid to boosting its profile in the manufacturing market and to increase the size of its global customer base, financial software maker Lawson Software Inc. (St Paul, MN) today said it will acquire ERP software vendor Intentia International AB for $480 million in stock.
The deal, which has already received board approval, creates an enterprise software company with 4,000 customers, 3,500 employees and $770 million in revenues. The company, which will operate as Lawson with headquarters in St. Paul, will have a customer base that is 45% US-based and 45% Europe-based. The remaining 10% of the company's customers are in Asia.
Lawson also announced that, following finalization of the deal, the company's president and CEO Jay Coughlan will step down. He will be replaced by former GEAC and J.D. Edwards executive Harry Debes. Coughlan, in a statement, said he supported the Intentia acquisition.
Richard Lawson, who co-founded Lawson in 1975, and Romesh Wadhwani, Intentia's chairman, will serve as co-chairmen of the new company. Intentia CEO Bertrand Sciard, who took over the company last March, will become chief operating officer responsible for global field operations.
The combined company will primarily target mid-size enterprise customers, competing against vendors such as Epicor, Microsoft and larger ERP players SAP and Oracle, which have begun to focus on the mid-market. Lawson's Landmark product line has historically targeted customers in service industries such as healthcare, retail, education, banking and insurance. Intentia, on the other hand, has focused mainly on customers in manufacturing and primarily in Europe.
Lawson's purchase of Intentia follows an $85 million venture capital investment in the company last spring by Symphony Technology Group LLC and Tennenbaum Capital Partners LLC. At the time, company officials said Intentia would use the capital to increase its presence in the U.S. via hiring and marketing efforts. At the time, Intentia said only 200 of its customers were in the U.S.
In recent months, however, Intentia has undergone significant restructuring and cost-cutting. In its most recent quarter, the company saw an 8% drop in revenues.
Similarly, in its most recent quarter, Lawson's revenue fell to $82.7 million from a year-earlier figure of $91.6 million. Lawson also has been undergoing a cost-reduction campaign, said Robert Barbieri, Lawson's CFO in a conference call following the merger announcement.
The deal represents a continuation of a consolidation trend in the enterprise software space which, in recent months, has seen the acquisition of Peoplesoft by Oracle and the purchase of Mapics Inc. by Infor Global Solutions among other deals.
Analysts called the acquisition a good deal for Lawson at 1.2 times Intentia's 2004 revenues. Bruce Richardson, chief research officer at AMR Research, said, however, the combined company will "face integration difficulties." For one thing, Richardson said, the Lawson and Intentia product lines are significantly different, and the two companies share few customers. For another, said Richardson, the two companies have different geographic areas of focus and different cultures.
Co-chairman Wadhwani, in a conference call, said the combined company will attempt to capitalize on the differences between the Intentia and Lawson products and customer bases. He said the company will attempt to sell the Intentia manufacturing products to Lawson customers in the U.S. and the Lawson financial products to Intentia customers in Europe and Asia.
Officials provided few specific plans about Lawson's product integration strategy. Wadhwani, however, said where the two companies' products do overlap -- in financials and HR, for example -- Lawson will migrate customers to its strongest products and newest platforms. Lawson officials promised to support all existing Lawson and Intentia products for at least the next five years.
Wadhwani said the new Lawson will be able to increase its investments in R&D. Specifically, he said, the company plans to develop new enterprise performance management, business intelligence and analytics products that will be leveraged across both the Intentia and Lawson product lines.
Lawson officials declined to discuss plans for post-merger employee or operating expense reductions.