There was significant news related to the ERP software and Cloud based applications technology market this week with the announcement by Koch Industries that the privately-owned conglomerate intends to exercise options to acquire all of Infor.
Koch Equity Development has entered into a definitive agreement to acquire the remaining equity stake of Infor held by Golden Gate Capital. According to the announcement, at the close of the transaction, Infor will become a standalone subsidiary of Koch Industries, and will continue to be led by the company’s current management team from its headquarters in New York City.
The transaction is subject to customary conditions and regulatory approvals and is expected to close in the first half of 2020.
Financial terms have not been disclosed but we have read of some unofficial estimates valuing the transaction at upwards of $13 billion.
What led up to this development was that in late 2016, Koch Industries had initially announced the intent to make a $2 billion equity investment in this mid-market and industry centric ERP applications provider.
At the time, Supply Chain Matters characterized the announcement as stunning, both from the perspective of a global-based manufacturing and services conglomerate taking a significant equity position in an ERP provider, and in the notions of a co-innovation partnership. There was added speculation that such an investment would likely imply conversion of multi-Koch business and industrial business units subsequently adopting and improving Infor based Cloud ERP applications technology.
Supply Chain Matters Initial Perspectives
Prior to the initial $2 billion equity investment by Koch in 2016, the direction for Infor was clearly focused on accelerated market growth and an eventual IPO.
With upwards of over 60,000 customers garnered from a flurry of prior acquisition efforts directed at smaller or niche industry specific enterprise level technology providers, the need for overall integration and upsell to Cloud based deployments was obvious. However, the customer reach is vast in size and scope.
Koch’s initial investment was the shot in the arm to boost market presence and to gain added learning as to the manufacturing and supply chain management challenges of large, dominant industries.
Under the nine-year CEO leadership of former, Wall Street M&A and enterprise technology veteran executive Charles Phillips, the technology company made a number of far-reaching investments and acquisitions in areas to shore-up technology staffing, native Cloud applications development, in a more focused go-to-market strategy honed on industry specific and unique enterprise applications support needs. Investments in advanced analytics along with artificial intelligence and machine technologies spawned the Coleman AI platform
In August of 2019, Phillips role of CEO was assumed by the then CFO, Kevin Samuelson, who subsequently restructured the technology provider’s senior leadership ranks as well as embarked on a broad cost-cutting and business review effort. Such efforts pared-back certain industry and go-to-market business segments and was perceived to be motivated by needs to trim the company’s overall balance sheet in preparation for pending IPO.
From our lens, this week’s announcement of the de-facto complete acquisition of Infor either moves the IPO to another period, potentially takes IPO off the table towards a different business strategy, or instead provides this ERP and supply chain technology provider the umbrella of a well-capitalized privately funded and cash rich enterprise to make additional investments in key areas.
Operating as a business strategy extension of Koch Industries could imply the leveraging of Infor’s technology as an added showcase of digital transformation for internal business process, production, supply chain and ongoing product innovation needs in the industries that Koch conducts business in. The new parent may well discover new jewels in AI/ML enabled decision-making capabilities and in the Infor Nexus (former GT Nexus) B2B supply chain platform.
Operating under the umbrella of an industrial conglomerate, conversely presents the challenge in fostering a fast-paced, innovation-driven, business culture model. That is candidly, an uncharted model within the existing Cloud software and ERP technology industry.
For Infor’s vast customer installed base, the implications of this week’s announcement will require a robust communications outreach as to Infor’s business, added software and technology development and customer support strategies moving forward.
We will all likely have to wait until the transaction is consummated and the business integration occurs before gaining such insights.
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