Red Prairie Corp.'s acquisition by private equity fund Francisco Partners won't change the company's strategy or leadership and should reduce risk for Red Prairie's customers, company officials and industry experts said.
Red Prairie (Waukesha, WI), a provider of supply chain execution applications, agreed to be acquired in order to obtain funds that can be used to finance the company's continued growth, said Red Prairie spokeswoman J.J. Berrall. Red Prairie declined to disclose terms of the acquisition.
Francisco Partners' deep pockets (the value of the firm's fund is estimated at $2.5 billion) could help Red Prairie to enter new software markets such as supply chain planning or to expand its vertical industry focus which currently extends to consumer goods, food and beverage, high technology, retail and pharmaceuticals industries, Berral said.
Red Prairie considered a public offering as a way to raise capital, said Berrall. The private equity deal, however, will allow the company to "focus on increasing value for our customers rather than concentrating too much on shareholder value."
Red Prairie, with 600 employees, expects 2005 sales of $140 million and net income of $28 million. Company leader John Jazweic and his management team will remain with Red Prairie after the acquisition which is expected to close by early May. Francisco is not expected to be involved in day-to-day operations.
The deal continues a trend of private equity firms investing in growing technology providers that are in need of cash. In 2002, for example, Francisco Partners acquired business-to-business e-commerce service and software provider GSX Corp. (Gaithersburg, MD) from General Electric Co. Last October, Francisco bought the EDI Services business of IBM. Recently, Francisco merged the EDI business into GSX.
Another private equity firm, Golden Gate Capital, has invested in several enterprise software providers, including Blue Martini, Infor and Inovis, noted Greg Aimi, research director at AMR Research in a published report.
"This acquisition reduces risk for RedPrairie customers. Expect that RedPrairie and Francisco Partners will pursue an aggressive growth strategy." Aimi said.