Baan Sold to Investment Group
A venture capital group has agreed to purchase ERP application solution provider Baan.
The group, comprising General Atlantic Partners LLC (GAP) and Cerberus Capital Management L.P., agreed to buy Baan, a $2.4 billion unit of London-based Invensys plc, for $135 million.
Invensys, which acquired the Dutch software maker in 2000 for $708 million, announced plans in April to sell the financially troubled Baan as part of the company's overall restructuring plans.
Headquartered in the Netherlands, Baan was formed in 1978, and has 6,500 customers worldwide and installations at more than 21,000 customer sites.
GAP and Cerberus, which have nearly $14 billion in combined investment capital, plan to merge Baan with another company it owns: SSA Global Technologies, a provider of enterprise solutions for process manufacturing and discrete manufacturing.
Industry-watchers say the deal makes the new company the fourth-largest player in the ERP market, which continues to experience consolidation. Earlier this week PeopleSoft acquired J.D. Edwards ("Peoplesoft to Acquire J. D. Edwards")
in a stock deal valued at $1.7 billion. The blockbuster deal, which vaulted PeopleSoft to the number-two application-provider spot, along with the Baan deal, represent more change in the ERP market than has occurred in the last five years.
Brian Zrimsek, a research director with Gartner, says consolidation in the ERP was inevitable and that he expects to see even more later on this year among the mid-market ERP players. "We are expecting the market to be flat for another year. That forces the hand of some mid-market players. Short-term consolidation shores up viability issues, but long term, the questions are about product," he says. "The companies will survive, but what products will survive?"
The Baan sale is expected to be completed in about six weeks, with the combination of SSA GT and Baan happening a month or two later. Baan will operate globally as the Baan division of the combined entity with dedicated sales, marketing, development, consulting, and support.
The combined company, which will have more than 16,500 customers, is expected to have the world's largest installed base in manufacturing. It will also have nearly $600 million revenue, with $160 million of that coming from combined product-licensing fees.
"Baan has invested a lot in developing the next generation ERP systems with a current architecture and richer functionality. This will provide a viable migration path to many of SSA GT's other customers as they look to upgrade their ERP systems over the next two to three years," said John Bermudez of AMR Research.
In a report issued this week, Bermudez says that bringing Baan into the SSA fold gives SSA a competitive ERP system to sell to the rest of its installed base. He also hailed the deal as for Baan customers "because it brings the product into a company that is dedicated to the ERP business."
Commenting on the deal, Zrimsek says the company had a good vision, but it wasn't a good fit for Invensys, so the company had to find a new home. There are, however, still some questions. "Baan has admirable goals about migrating users, but will that become a reality? That's where I'm skeptical," he says.
"Teaming up with SSA give them girth," he adds. "This is a case where size does matter. The larger the installed base, the great the maintenance revenue."
Over the past three years Baan has made significant investment in its solution offerings including its next generation Enterprise Backbone code-named Gemini, which is due out this fall. That product is expected to create an attractive migration package for other SSA GT customers that want to move to an Internet-based platform.
Baan executives say the merger with SSA will create a stronger company focused on manufacturing software sales. "The two companies...are very focused on the manufacturing industry--at the same time, they are very complementary," Laurens van der Tang, Baan's president said on a conference call. Combined, the companies "will be able to make each other much stronger in the market."