Wow, what a morning. As many of you may already know, Lawson has announced its acquisition of Intential International. It also announced the planned departure of Jay Coughlan as Lawson’s CEO.
Having been asked by a number of you to provide some thoughts, and never one to pass up an opportunity to voice my opinion, here’s my early insight into these developments. I will do my best to continue to provide coverage of these exciting developments, and look forward to getting your feedback–please post a comment.
No, Lawson isn’t going away. No, you shouldn’t jump into the job market. There will no doubt be a lot of fear and uncertainty. As with any news of this magnitude, the first thing we need to do is take a deep calming breath, and try to digest this rationally.
What do we know about Intentia?
Intentia, a Swedish ERP provider, has been on the ropes for a number of years and has been losing money. Both companies have recently undergone major restructuring efforts, with requisite cost reductions and bottom-line improvements. Intentia has been losing money for years, and has had a number of investors and benefactors pumping money into it, with no return on their investment. This is actually a “cheap” acquisition for Lawson (roughly 1.2 times Intentia’s revenue). Lawson clearly had to grow quickly in order to compete against the big players, SAP, Oracle, and Microsoft, and this may give them the means to do that.
What does it mean?
This merger promises to create a true “global” software enterprise for Lawson. The combined company will retain the Lawson brand, and continue to be headquartered in St. Paul. The “New Lawson” will serve about 4,000 combined customers, and have nearly $1 Billion in annual revenue.
There is a broad reach in the vertical markets that these vendors serve. Lawson already serves the Retail, Healthcare, Financial Services, Government & Education, and Professional Services markets. Intentia adds Manufacturing and Maintenance/Asset Management, Food & Beverage, Wholesale Distribution, and Fashion & Apparel. From that standpoint, I think it’s a great strategic fit with little overlap.
The combined company provides an opportunity to achieve greater economic scale for its development and support operations. It also has the prospect for significant revenue growth thru expanded marketing and cross-selling. The merged application set will leverage both companies’ Service-Oriented Architecture capabilities (Lawson’s are obviously still forthcoming-a vision more than a reality). New applications will be based on Lawson’s Project Landmark technologies, and leverage both companies’ partnerships with IBM. Expect more to come on this topic.
The “New Lawson”
The combined companies are targeting themselves to become the “largest software provider to the mid market”. The New Lawson will be co-chaired by Richard Lawson, current Chairman of Lawson, and Romesh Wadhwanit, Chairman of Intentia International. As part of this merger, Jay Coughlan will be stepping down. I personally wouldn’t try to read too much into this; Coughlan has certainly done his job to guide Lawson through their IPO process, and transformed them into a recognizable brand in the ERP marketplace.
I feel like Lawson is in the midst of “turning the ship”; now that the IPO is behind it, Lawson has been concentrating more on its technology, with the upcoming 8.1 Technology release and Project Landmark. It’s a bit disconcerting that they will now be so distracted by this merger, and I would expect a lot of Lawson folks to leave, particularly if this merger drives the stock price up, and they can cash out their stock options.
I’m personally very excited that Richard Lawson is so much back in the picture, both as co-Chairman, as well as the chief architect and visionary for Lawson’s Project Landmark. Richard Lawson refers to both he and Romesh Wadhwanit as “elder statesmen” in the ERP software market. Both men share a passion and a vision for developing software. The signal I’m getting is that Lawson is returning to its true roots as a company driven by software and technology vision, rather than as a reactive company driven by Wall Street’s whims.
What are the challenges?
Some industry analysts are less than enthusiastic about this merger, as they don’t see it as a good fit. They also think that that Intentia has and will continue to be a money-loser. Their fear is that Initentia will drag Lawson down. Lawson’s stock price has dropped significantly today.
Becoming a global company is very difficult. First and foremost, it means meeting multiple regulatory requirements. The investment communities in the US and in Sweden are very different, and it will require a savvy financial team to satisfy them.
It also means merging the cultures, and working across the time zones. Both companies have offshore development organizations, so they are a little bit experienced in this. But the relationships and dynamics of an offshoring relationship is different-the software vendor is the customer. In this case, it’s the same company, so there is no one who has the “upper hand”..
Another significant challenge will be the competitive response. You can be certain that Oracle and SAP are going to respond in some fashion to either try to block this merger via regulatory means or by attacking the “new Lawson” by more competitive means.