unnoticed or tersely reported by market observers was a recent merger of two
seemingly unlikely enterprise software providing matrimony candidates. On December
2, Agilisys International, a provider of business software
solutions almost exclusively to the process manufacturing industries (and the
recently spun off former Process Manufacturing and Distribution
division of SCT Corporation, see Agilisys
Continues Agilely Post-SCT), announced the acquisition of BRAIN
AG, a German provider of specialized ERP and Supply Chain Execution
(SCE) software primarily to automotive suppliers and other selected industries
worldwide. Jim Schaper, Agilisys Chairman and CEO, has appointed Ernst Gemmasmer
to the post of Senior Vice President (SVP) to lead the European operations of
BRAIN Automotive. Post-transaction, the BRAIN Automotive and
the BRAIN Industries subsidiaries will reportedly operate as
separate business units of Agilisys International. The acquisition was financed
through funds managed by Golden Gate Capital and Parallax
For over 20 years, BRAIN has been enhancing the productivity and competitiveness of automotive suppliers by providing them industry-specific software and consulting services tailored to meeting the demanding requirements of the automotive industry. Agilisys' acquisition of BRAIN brings closure to a difficult insolvency period of one of the most widespread used plant-centric ERP systems in Europe and North America, and a consequent relief to its disconcerted users. With over 1,600 referenceable customers in nearly 19 countries, BRAIN has been aiming its best-of-breed-like solutions at keeping automotive suppliers current, compliant and on the leading edge. As a result, although with HQ in Germany, BRAIN has been well known worldwide as the ERP system for mid-market automotive supplier plants.
December 9, Agilisys further announced that Kenneth (Ken) Walters has assumed
the position of President and COO of Agilisys, and he will also report to Jim
Schaper. With over 25 years of experience in the Information Technology (IT)
and Software Application market, especially in enterprise software, services,
global operations and acquisition integration, Walters reportedly brings a wealth
of global leadership and management expertise to a company that is rapidly expanding.
In his most recent position, Walters led HiddenMind Technologies, Inc.,
a mobile application platform provider, as President and CEO, responsible for
the company's overall solutions strategy as well as day-to-day operations including
sales, consulting, client services, product engineering, and marketing. Prior
to HiddenMind, Walters served as COO for Internet Security Systems
(ISS), president of Impact Innovations Group,
managing partner with Coopers & Lybrand and SVP at Dun
and Bradstreet Software. Walters was also the COO at Emerald
Systems, a leader in data storage management.
believes the addition of the above two experienced executives will insure it
can manage a much larger and globally oriented combined software company. Likewise
recently acquisitions-famished privately held competitor SSA GT,
because of the large financial backing of its investors, Agilisys believes it
can grow faster and without the typical legal intricacies associated with its
publicly traded competitors. There are therefore indications of another acquisition
being lined up for not so distant future, as Agilisys is actively looking to
acquire companies that either create depth or breadth in the verticals it is
currently in, or to expand into other verticals like in the case of BRAIN.
is Part One of a two-part analysis of the acquisition of BRAIN by Agilisys.
Two will discuss the Challenges and make User Recommendations.
a time when acquisitions are the order of the day, little seems to be surprising.
Yet, this acquisition will either be perceived as very perplexing on one side
or crystal clear without much ulterior mode on the other side. Perplexing and
confusing would be due to the fact that Agilisys' and BRAIN's products and target
markets have hardly anything in common. It is very likely that most of the staffs
of the two entities will have never heard about the other party, let alone have
ever competed against each other in the field. Therefore, any possibility of
synergy between the two parties is seemingly very slim. That, on the other hand
might lead us to the crystal clear rationale that this was strictly an opportunistic
move and a financial play of seasoned investors with a good nose. BRAIN, which
filed for bankruptcy in July (see The
Automotive OEMs Might Soon Contract 'BRAIN' Damage), has been looking for
a white knight ever since. Having been not particularly successful, and likely
desperate by the day, it has created an opportunity for a financial savvy group,
such as Golden Gate Capital and Parallax Capital Partners, to jump in and snatch
it for a fraction of its fair price from happier days.
might not necessarily be anything flawed with merging the two companies and
with the resulting entity being mere a sum of two parts. The market had already
witnessed the anguish of former Baan Co. and SSA
customers, which have both eventually been resolved quite favorably with subsequent
buyouts. To that end, BRAIN's numerous high-profile customers should feel a
sigh of relief. Until its bankruptcy last summer, BRAIN has been a publicly
traded company on the German stock exchange with annual revenues of over $90
million. The vendor has over 670 employees located in 24 offices in 17 countries
including numerous locations in Europe, US, Mexico and South America. BRAIN
is regarded as the No. 2 ERP/SCE software solutions provider in most of the
automotive supplier markets in Europe and the No. 3 in the US, and it also serves
some other vertical markets. With over 800 customers and 1,600 installations
globally, this acquisition should create a notable combined entity with annual
profitable revenues exceeding $130million, an employee population of almost
900 and customer installations approaching 2,000.
Background on BRAIN
a result of its own earlier acquisitions, BRAIN competes with its two automotive-focused
ERP packages, which are Xpert Manufacturing System, which runs
on IBM's iServer (formerly AS/400) platform,
and TRANS4M, which runs on UNIX and Microsoft
Windows server platforms. The two products differ in their fit to different
types of automotive suppliers, in addition to platform support. Xpert is better
suited to mixed-mode manufacturing requirements, whereas TRANS4M should appeal
to manufacturers with a lean/repetitive production environment (with its work-in-progress
(WIP) visibility, pay-point operations, multiple backflush methods, and other
automotive industry endemic functionality). Recent lingering BRAIN's difficulties
can be largely attributed to the fact that the company has never produced a
cogent strategy to bring the two dissimilar product lines together, finally
resigning to having a two-pronged product strategy. Moreover, hefty R&D expenditures
in German HQ to unify the products and spread into other vertical industries
will have also been the likely reasons that left the company financially vulnerable
for the revenue slump.
to its German parent's forays into different industries and management of dissimilar
product lines, the BRAIN North America subsidiary has long
been focused on Web-based software capabilities and domain expertise in automotive
supply chain communication/execution, as opposed to traditional ERP systems
in various industries. The automotive industry has unique characteristics that
make it highly conducive to Internet-based supply chain optimization and collaboration.
A car's or an engine's intricate bill of materials (BOM) results in many entities
being involved in its making.
Information transparency and supply chain integration are, therefore, the name of the game, and e-business technology, while not causing these requirements, is at least providing for their enablement. To that end, BRAIN has long been offering a suite of automotive-focused supply chain communication applications that integrate with multiple ERP systems. The platform agnosticism stems both from the need for stronger market competitiveness and from the homogenous back-office population within the customer base. While many existing customers may run on one of BRAIN's ERP solutions, many others have legacy systems or systems from another vendor that they are not planning to replace any time soon.
a result BRAIN NA has developed its e-Automotive Suite of B2B
communication and collaboration applications, which also includes SupplyWEB
Enterprise, a Web-based system for communicating procurement, shipment,
payment, supplier performance, and many other types of information, catering
thereby for almost every type of communication an automotive company has with
its suppliers. Moreover, with the latest SupplyWEB version 6.0, BRAIN has expanded
the Internet-based product's appeal by merging European and US/Canadian functionality
to better support manufacturers with plants on both sides of the Atlantic.
global, multiple languages ERP independent solutions would include ACmanager,
an Automotive Customer Manager portal application, and BRAIN-eX,
a TCP/IP Message Broker. In fact, BRAIN NA had achieved a notable traction with
its SupplyWEB replenishment system, with a recent large wins and momentum with
other prospects, giving thereby a pause to archrivals like QAD
(with its eQ and MFGx.net collaborative offerings,
in addition to the flagship MFG/PRO ERP product) and to the
likes SupplySolution and Future Three.
in November, BRAIN NA closed Q3 2002 as its seventh straight profitable quarter
amid a marketplace where losses and revenue shrinkage have been prevalent. The
recent wins include automotive heavyweights such as TRW, ArvinMeritor
and Meridian. Owing to the functional attractiveness of the
SupplyWEB product, some notable automotive suppliers have earlier committed
to using BRAIN (e.g., Volkswagen (VW), both
in European and US plants), despite the current diminished spending pattern,
and even immediately after the insolvency announcement. The vendor's cash position
has lately been strengthening also due to good teamwork in terms of both cost
management and debt collections. It is therefore a small wonder to see BRAIN
being acquired by the likes of astute capital providers. Although, a more plausible
scenario would have been to see a direct competitor, e.g., SSA GT, stepping
into the picture and acquiring at least the more attractive parts of BRAIN offering.
Having concluded the benefits of financial backing for both embattled BRAIN and its anxious customers, there is also a chance of the acquisition rationale being somewhere in the middle, meaning that some synergy could be generated between the future domestic partners, Agilisys and BRAIN. Agilisys' small client base (below 500) has also predominantly been North American, resulting in insignificant brand awareness and an undeveloped channel outside of the North American market, despite a strong focused offering. Since the process manufacturing market is highly global, Agilisys had to expand its global coverage to address the needs of its current and intended customers. To that end, BRAIN may provide Agilisys with additional distribution and range on a global basis especially outside North America. With the deal, Agilisys will grow from a $50 million company to a $130m company almost overnight, and will now have a solid support infrastructure and customer base internationally.
concludes Part One of a two-part note.
Two will discuss the Challenges and make User Recommendations.