If Richard Lawson doesn’t have a taste for aquavit, he may want to acquire one; Lawson Software’s acquisition of Stockholm-based Intentia Software will likely result in regular visits to Sweden for Lawson’s chairman.
When the deal is finalized—no date had been set as of press time—it will create an almost $1 billion, St. Paul–based provider of enterprise resource planning (ERP) software, with more than 3,500 employees serving approximately 4,000 customers in 40 countries. Focusing on middle-market companies, the combined organizations will have little overlap in market segments, and their merger will provide both with much needed geographic expansion in a category that has been experiencing rapid consolidation.
The two companies are currently working on integrating, with between 100 and 200 people at Lawson and Intentia directly involved in the process, according to Terrence Blake, Lawson’s director of public relations. Finalization may take longer than anticipated due to the extra time needed to convert Intentia’s financials into U.S numbers. “It’s a slow and tedious process,” Blake says, because the audit procedures involve tracking down years of contracts in 40 countries of operation.
While not known in the states as a hotbed of software developers, Swedes are actually early adopters of new technology compared to the rest of the world, according to the U.S. Department of Commerce’s Buy USA Web site. That makes the country a good test lab for new products and services.
While Minnesota may be more like Sweden than any other state in the U.S., it’s going to take more than a shot of aquavit to make this deal go down smoothly, according to a number of industry publications and analysts.
“Successfully turning two struggling companies into one healthier company will be a tricky task,” reported the June 3, 2005, issue of Computer World, noting that the two firms have had less than impressive results in re-cent years. Lawson reported losses in two out of the past six years, and Intentia has had losses for five consecutive years. Joshua Greenbaum of Berkeley, California–based Enterprise Applications Consulting told Computer World that “[a]t its current size, Lawson wasn’t long for this world.” The St. Paul company “needed to bulk up its customer base or be acquired,” he added.
Lawson’s Swedish appetite is part of an industry-wide hunger for consolidation in a sector that is experiencing signs of market saturation, according to a report by New York–based consulting firm KPMG on merger and acquisition trends in the European technology sector. “Above-average growth rates are difficult to achieve organically, except for companies with a unique product offering or positioning,” states the KPMG report, which adds that “transactions today are often less about buying technology than about buying market share, a client position, etc., which should directly translate into buying profits.” In other words, with the ERP market consolidating, being a mid-sized player can be a vulnerable position.
Even though his company faces a challenging road ahead, Richard Lawson spoke optimistically in the June 2, 2005, issue of Information Week: “Demand for ERP among mid-market companies is growing globally and remains underserved. The big ERP players aren’t doing it; and the small ERP players can’t do it.”
Still, Lawson does have competition. In November, Cambridge, Massachusetts–based Forrester Research released its evaluations of the top ERP vendors. While Forrester rated Lawson and Intentia strong performers, it liked two smaller providers—Epicor Software and QAD, both based in California—a bit better. Ray Wang, a senior analyst with Forrester Research, liked Lawson’s and Intentia’s license metrics (i.e., their simplified set of options for users to license the software). But Wang believed that the two were not as strong in software lifecycle management—that is, making it easy for their software clients to upgrade.
While the merger gives Lawson some much needed sales territory, neither Lawson nor Intentia has much of a foothold in the important Asia Pacific market, where Intentia derived 14 percent of its sales in its last fiscal year. So how do you say aquavit in Chinese?
