Infor's offer for Lawson could spark bidding war

Infor has offered US$1.8 billion for rival ERP vendor Lawson; will HP, IBM and Oracle counter?

Infor's roughly US$1.8 billion offer for Lawson Software will likely be far from the only salvo in a bidding war for the ERP (enterprise resource planning) vendor that could see the likes of IBM, Hewlett-Packard and Oracle enter the fray, according to some analysts.

Lawson disclosed Infor's offer late Friday after several days of rumors that the company was seeking a buyer.

The combined company would approach $3 billion in revenue. Lawson reported $736.4 million in revenue during its fiscal 2010, while privately held Infor has listed its revenues at over $2 billion.

Infor's offer of $11.25 per share, made along with its parent private equity firm Golden Gate Capital, was lower than Lawson's closing stock price on Friday. Observers expect that bid is simply an opening gambit, with Lawson fetching a significantly higher price if it is indeed sold.

Observers have expected Lawson to go on the sale block since last year, when activist investor Carl Icahn took a stake in the company. Icahn is known for aggressively pushing companies he invests in to make moves he believes would increase shareholder value.

But the fingerprints of recently appointed Infor CEO Charles Phillips are all over the Lawson deal as well, said analyst Ray Wang, CEO of Constellation Research. Phillips is a former co-president of Oracle, who along with co-president Safra Catz, engineered the vendor's long run of acquisitions in recent years.

Growth by aggressive acquisition is not an easy strategy to pull off, Wang added. "The balance is between paying debt, retaining customers and driving new business."

But Lawson has solid finances as well as strong products in areas like health care, manufacturing and finance, which fill some key gaps for Infor, analysts said.

Lawson would also give Infor some valuable expertise, according to John Henley of the consulting firm Decision Analytics, which focuses on Lawson products.

"Infor has a much broader product line -- horizontally -- than does Lawson. But they lack the BI (workflow/dashboards/reporting/notification services) solutions, which Lawson has been pretty successful at selling," Henley said via e-mail. "In addition, Lawson has proven that it can easily integrate between different products that weren't part of the original solution/design."

The fit between the companies would not be precise, however. Infor has moved to align its software with Microsoft's technology stack, while Lawson has a long-standing relationship with IBM.

This shouldn't be a big deal, in Henley's view. For one, Lawson also uses some technologies from Microsoft and SAP, for user interfaces and BI (business intelligence), respectively, he said. "And as ERP becomes more about the cloud, the technology becomes irrelevant anyway, and what's important is speed to implementation," he said.

But for all Infor may gain, customers might suffer under its ownership, according to another observer. "I have to say it wouldn't be great for Lawson customers," said Forrester Research analyst Paul Hamerman. "Customers are used to dealing with Lawson and they know what to expect. Infor's track record in acquired products is not that stellar."

The problem is that Infor has a huge portfolio of products, yet also tries to operate the company in a lean manner, he said.

Some products have been put into maintenance mode, with fewer development resources devoted to them, Hamerman said. The question for Lawson customers is "how much innovation will happen if and when an acquisition will occur."

Lawson's board doesn't have to sell the company, Hamerman noted. It could also consider selling off only some products, such as those for human resources, in order to focus on health care as a core business, he said.

Henley expressed a more optimistic, albeit wait-and-see view.

"While I would miss Lawson personally, I think it actually wouldn't be a bad fit," Henley said. "Infor's heritage is similar to Lawson's in that they both grew out of early mainframe accounting products. Both have taken a number of strategic technology redirects, with the cloud being the latest new focus."

"A lot of course depends on what, if any, migration plans Infor has for the acquired products," he added. It's not likely that Lawson will agree to a sale "if all Infor is planning to do is buy their maintenance contracts and force everyone to migrate to an Infor product."

In buying Lawson, Infor may also be seeking to improve its financial profile before filing for a long-expected IPO (initial public offering).

"Infor isn't big in the health care market, but that's one of the big, growing parts of Lawson's portfolio," Wang said. "It gives Infor a revenue-generation machine that's sorely missing right now."

However, a merger with Lawson would likely delay the IPO while the companies complete their integration, Wang said.

What remains to be seen is if Infor faces competitive bids for Lawson. It stands to reason that IBM would consider such a move given their long-standing relationship, according to Wang. "The wild cards are HP and Oracle."

HP CEO Leo Apotheker has stated he intends to grow the company's software business. He was scheduled to lay out a broad strategy for HP during an event later Monday.

And while Oracle has had ample opportunity to buy Lawson, that's no reason to rule out the possibility that it will submit a bid now, Wang said. "The difference is that somebody has pulled the trigger."

Spokesmen for Infor and Lawson declined comment.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is Chris_Kanaracus@idg.com

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Tags business issuesapplicationsMergers / acquisitionsenterprise resource planningIBMInforLawson SoftwaresoftwareOracleHewlett-Packard

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Chris Kanaracus

IDG News Service

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