Investment Firm Buys Geac and Sends ERP Software to Infor Global

New company to get remaining products in a $1 billion deal

Private equity firm Golden Gate Capital Corp. last week agreed to buy business software maker Geac Computer Corp. for about $1 billion.

The plan is to split up Geac, which in recent years has made numerous acquisitions, according to Golden Gate Capital.

The Markham, Ontario-based company's ERP software -- including System21, Runtime, RatioPlan, Streamline and Management Data -- will become the property of another Golden Gate Capital-funded company, Infor Global Solutions. The remaining product lines will form the basis of a new, as yet unnamed company.

The companies expect the deal to close early next year.

Geac, which bills its products as "software for the CFO," reported a profit of $77 million on revenue of $444.4 million in the fiscal year that ended April 30. The enterprise applications business drove 80% of Geac's revenue last year, the company said in its annual report.

The software that Infor is acquiring accounts for about a quarter of Geac's revenue, said Infor President and Chief Operating Officer Ken Walters.

Formidable Player

Infor is becoming a formidable player in the ERP market, with a portfolio built through acquisitions, including the company's $350 million purchase of Mapics Inc. earlier this year.

The privately held company, based in Alpharetta, Ga., sells its products mostly to companies with less than $250 million in annual revenue. Infor has 2,300 employees and 18,000 customers worldwide.

The new company to be formed by San Francisco-based Golden Gate Capital will include two business units built around Geac's remaining assets. It will be headed by a CEO who will be named prior to the closing of the transaction.

The new company's financial applications unit will focus on Geac's Enterprise Server, SmartStream, Anael, Extensity and Comshare products. Meanwhile, an industry-specific applications group will concentrate on serving vertical industries, including libraries, local governments and restaurants, Geac said.

Before accepting Golden Gate's offer, Geac's management team spoke with two-dozen potential suitors, Geac CEO Charles Jones said in a conference call with analysts.

Jones said Golden Gate had deep pockets and enough resources to back Geac's technology plans. "Golden Gate is committed to continuing the vital support of Geac's products," he said.

Analysts at Boston-based AMR Research Inc. said in a report that Geac's fate illustrates that simply gobbling up lots of applications with lucrative maintenance revenue streams won't be enough to ensure vendor viability.

"[Geac] lagged behind most vendors in technology innovation and deep verticalization for the customers it served," the report said. "In its model, its only way to sustain and grow margins was to continue on the acquisition trail. But the continued consolidation in the software market made those acquisitions more difficult -- particularly at the price points it was willing to pay."

Joshua Greenbaum, an analyst at Enterprise Applications Consulting in Berkeley, Calif., added that the sale of Geac will likely benefit shareholders and management more than customers.

The Geac portfolio will mostly be used as a cash cow that generates maintenance revenue, he said. Greenbaum said he doesn't expect the new firm to spend significant research and development dollars to update products.

Cowley is a reporter for IDG News Service. Marc L. Songini contributed to this story.

Copyright © 2005 IDG Communications, Inc.

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