Great Plains on a Shopping Spree

Event Summary

On January 6, in an effort to expand its customer base and reseller partner channel Great Plains, a provider of financial management software for midsize businesses, announced it plans to acquire RealWorld Corp., a developer of accounting and business solutions. Through the acquisition, Great Plains expects to add over 20,000 mid-market customers and expand its channel capacity through RealWorld's partner network. Great Plains will gain over 65 team members located in Manchester, N.H., with development, marketing, sales, and business-management experience. The company says it plans to use the northeast office to provide consulting, training, migration, and support services to customers and partners. Great Plains will issue approximately 184,000 shares of its common stock and $5.5 million in cash. The deal is subject to regulatory conditions and is expected to close in late February.

In a separate move, Great Plains also unveiled plans to acquire Fixed Asset Management LLC, a wholly owned subsidiary of The Forestar Group to gain the rights to Forestar's Fixed Asset Management product, which allows a company to record, track, depreciate, and analyze its fixed assets. Great Plains has been marketing the product through an original equipment manufacturer agreement since 1997. Under the terms of yesterday's deal, it will issue 104,000 shares of stock and an additional $900,000 in cash. Great Plains CFO Tami Reller said buying the company would give the vendor "greater control of the future of the product."

These deals continue a buying spree for Great Plains, bringing the company's total number of acquisitions to four in its 2000 fiscal year, which started June 1, 1999. In addition, Great Plains acquired three companies in the previous fiscal year.

Market Impact

Great Plains is taking full advantage of its current favorable market capitalization to extend both its foothold in the coveted small-to-medium (SME) ERP market segment and fill the current gaps within its product portfolio. We believe that the company is striking a good balance in extending its offering by both acquisition and partnering with best-of-breed vendors. However, the company will be faced with two challenges. First, it will have to undertake full integration of the acquired applications, since some of its fierce competitors within the SME market, like Solomon Software, promote their single code base for the entire product range as a big advantage. Second, we expect growing pains in merging disparate product lines within the newly extended large affiliate channel.

User Recommendations

As a summary of our recommendations in TEC's note on Great Plains (See TEC Technology Research Note: "Great Plains: Strong Channel and Microsoft focus for Dynamic(s) Growth" January 3rd, 2000), Great Plains should be included on any package selection short list within the Small-to-Medium Enterprises (SME) market where electronic business and financial modules are the main pillars of an enterprise application. However, any organization evaluating Great Plains should consider existing functionality only, and, in the case of final selection, should negotiate incorporation of new applications components now at negotiated license fees, and be wary of possible application integration problems.

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