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.