Geac, which started out as a systems integrator and later became an acquisitive player in the mid-market enterprise software space, said its brand name would disappear and its business broken up following its acquisition by Golden Gate Capital for US$1 billion on Monday.
Under the terms of the agreement, a Golden Gate-funded company called Infor will acquire Geac’s enterprise resource planning (ERP) software, while its financial and industry-specific applications will be rolled into an as-yet-unnamed new company. The financial applications include Enterprise Server, SmartStream, Anael, Extensity and Comshare. Executives said the deal should close by the first quarter of next year.
Golden Gate Capital, a private equity firm based in San Francisco, has taken five companies private in the last two years, primary in the IT services areas. Charles Jones, Geac’s chief executive, said in a conference call that there were at least 25 other candidates interested in buying the firm and five that were actively engaged in a deal. Cresendo Partners, Geac’s largest shareholder, had recently tried to install some of its employees on Geac’s board to block an unprofitable deal, but Geac said it had received Cresendo’s support for the Golden Gate acquisition.
“Geac’s strategy has been horizontal – we’ve offered multiple platforms across multiple industries,” Jones said. “Their strategy has been to be very deep and vertical. As the industry consolidates . . . this combination will afford the ability to deliver that depth to the customer.”
Geac moved beyond its channel roots many years ago by building custom software for clients such as libraries. In the 1990s it began buying up a number of smaller software organizations that gave it considerable expertise in mainframes, among other areas. In 2001, it ousted Ottawa-based business intelligence provider Cognos on an annual list of top ISVs compiled by consulting firm the Branham Group, though by then its stock had already slipped from $27 to $2. More recently, Geac had branded itself as a provider of software products to assist enterprise CFOs, and became a Microsoft Gold Certified Partner as part of a strategy to build more channel relationships.
Ray Wang, senior analyst in enterprise applications at Cambridge, Conn.-based Forrester Research, said companies that are below $200 million in revenue are good targets for acquisition, while companies $500 million and below could make acquisitions or merge with similar companies.
“There seems to be this race to get to $1 billion (in revenue) to achieve economies of scales and a consistent maintenance revenue,” he said. “SOA (service-oriented architecture) and Web services architecture make it all possible to have believable convergent technology strategies.”
Wang said Geac was a victim of poor management, though he said the company did a good job or handling its maintenance business.
Jones said the Golden Gate deal would take Geac to a new level of valuation without the risks of executing a strategy that must involve acquisitions. Though Geac’s name won’t survive the transaction, he said some of its product names likely will.
“I think the MPC product will be as good for Infor and other Golden Gate products as it has been for Geac. It widens the channel,” he said. “I think it’s good because it ensures the larger enterprise that there is an ability to invest in new product solutions.”
Geac had been headquartered in Markham, Ont., and employed 2,200 employees. Jones said details about the integration would not emerge until the deal closed.
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