According to Baan's press release, the Boards of Invensys plc and Baan
Company N.V. announced the terms of the recommended cash offer to acquire
the entire issued share capital of Baan (the "Offer"). The Offer will
be $2.65 in cash for each Baan share, valuing the entire existing issued
share capital of Baan at approximately $709 million. The Offer is due
to commence within three weeks of this announcement at which time Baan
shareholders will be invited to tender their shares.
with this announcement, Invensys, as a part of its preliminary results
announcement for the year ended 31 March 2000, is announcing the formation
of the Invensys Software and Systems division ("ISS") as an extension
of its Sensor to Boardroom product strategy for becoming an integrated
software and systems provider. Invensys claims that the Baan acquisition
is an important step in implementing this strategy and the combined ISS
division will be a leader in the supply and development of integrated
business application software. The pro forma combined division will have
annual total revenue of approximately $2 billion.
ISS division will be managed by Bruce Henderson, currently the division
Chief Executive of Intelligent Automation at Invensys, with Laurens Van
der Tang, currently Executive Vice President, Research and Development
at Baan becoming President of Baan upon closing. Baan will continue operating
under the Baan name and will continue to compete in the open market with
the full range of Baan products. Barneveld, in the Netherlands, will remain
the headquarters of Baan. The headquarters of ISS will be Herndon, Virginia
in the United States.
restore Baan to profitability, Invensys plans to implement a rigorous
restructuring and cost management program under which costs will be reduced
by approximately $60 million to $120 million per quarter by Q4 2000. Invensys
expects to incur restructuring charges of $400 million over an 18-month
period from the date of acquisition. The Board of Invensys believes that
implementation of its restructuring plan will return Baan to breakeven
within 12 months. Invensys claims to be committed to a strong research
and development program at Baan and the full suite of Baan products.
on the Offer, Allen Yurko, Chief Executive Officer of Invensys, said:
"This acquisition is a significant step towards our stated goal of becoming
an integrated software and systems provider, offering technical solutions
across the entire automation and controls value chain. Baan is an excellent
fit with Invensys' existing software and systems businesses and the acquisition
of Baan and integration into ISS will create a leader in the business
applications solutions field with a strong focus on the manufacturing
and industrial sectors."
on the Offer, Pierre Everaert, Interim Chief Executive Officer of Baan,
said: "We think this is an excellent outcome for shareholders, customers
and employees. Invensys is a company that is committed to maintaining
our strong R&D capability and our leadership position in technology, which
has always been the Baan hallmark. Moreover, there is a strategic fit
here in that Invensys and their strong management team understand our
core customer base of manufacturing companies and industrial enterprises."
This is yet another instructive tale of a software company's rise and
fall. Having achieved a meteoric rise until the second half of 1998, and
giving SAP a run for its money at some point, Baan has struggled for over
two years to turn around its flailing business. Management blunders and
its megalomaniac strategy of creating holistic enterprise applications
by acquiring a myriad of disparate products sent the company in a downward
spiral. Its troubles were only asseverated by a downturn in the entire
ERP market combined with current investor pessimism about technology stocks
(ERP in particular).
good news is that the long protracted suspense about Baan's future is
over. Baan has resolved its poor vendor viability issue by having a well-capitalized
parent with a strong global presence. While the acquisition will be painful
in the short term due to severe cost cutting and restructuring, it may
turn out favorably for Baan in the long run. Invensys, with its ambitious
'Sensor to Boardroom' strategy, seems determined to provide manufacturers
a solution that may satisfy all their needs (from the shop floor to cyber
space). Baan offers ERP and e-business software, as well as customer relationship
management (CRM) software from its acquisition of Aurum, and supply chain
planning and execution software from its acquisitions of Caps Logistics
Invensys division Wonderware also offers ERP software from its last year
acquisition of Marcam Solutions, which is aimed at process manufacturers,
whereas Baan's ERP system is primarily suitable for discrete manufacturers.
Wonderware is soon to be part of the ISS Division. The idea of providing
all elements of the game is tempting and possibly lucrative, but every
effort should be made in order to avoid the poor product delivery execution,
which partly led to Baan's demise.
Baan's service & support viability remains uncertain owing to the impending
exodus of Baan staff and questionable Invensys' core competency in extended
ERP applications. These factors may aggravate its customers' anxiety.
Speculations that Invensys will only keep Baan's core ERP product to gain
strength in manufacturing sectors, but may sell off product lines such
as the Aurum CRM business and Caps Logistics to recover the cost of the
acquisition, have mounted. Although Invensys has indicated it will not
dismantle Baan, stating it "is committed to a strong research and development
program at Baan and the full suite of Baan products" it may not be good
enough for disconcerted customer base. Invensys should promptly address
customers' concerns by unequivocally stating its more detailed product
strategy and timeframe for its delivery. Also, it is very important that
the company explain why it believes impending layoffs will not jeopardize
future product development and/or service & support.
market should expect a slew of Baan's direct competitors preying on its
large, perturbed customer base. SAP, for one, has been working on creating
interfaces to ease migration for current Baan customers to its own software
We believe that the operations of existing users and organizations in
an advanced stage of implementation will not be seriously jeopardized
in the short term. Nevertheless, they should be on a high alert and develop
medium- to long-term alternative plans for moving to new technology. Alternatively,
they may want to consider beefing up their internal resources from the
expected exodus of very experienced Baan consultants. Asking for Invensys'
assurances and firm commitment to future service & support goes without
the acquisition is consummated and a new product strategy becomes clear,
we do not advise potential users to evaluate this product. Organizations
that are at an early stage of implementation may want to put the project
on hold for duration. We suggest evaluating the features, price, and corporate
viability of other vendors instead, before making a selection. Baan could
be used as a bargaining chip against other vendors though if the company
is willing to provide its solution at a low cost, with a written guarantee.
Baan exactly fit your requirements, make sure that you have the prerogative
to change the source code and a team of skilled resources available. 'Self-sufficiency'
should be the name of the game.