Baan: SSA may take on the challenge

Invensys shuts the Baan door

By Datamonitor, 17th April 2003

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Baan is among a batch of companies that Invensys has put up for sale. Invensys now wants to focus on production management after a dismal financial performance in weakening trading conditions. While Baan is likely to sell for a fairly low price in the current market, Invensys will finally be able to concentrate its attentions elsewhere.

Invensys said it will seek suitable equity partners or new owners for the businesses but as it plans to keep some of Baan's operations in-house, it has little incentive to retain an interest in the rest.

In February, Invensys warned it would have to write down a substantial part of the $714.7 million it paid for Baan in 2000, as the poorly performing operation is likely to contribute a $16.8 million loss this year.

With more than 15,000 customer sites worldwide, Baan is bound to attract widespread interest, though the ERP market is brutally competitive and market leaders such as SAP AG have tended to make progress at the expense of smaller competitors.

What gives SSA a big advantage is that it is both cash rich and privately owned, and not worried about a skeptical market reaction to taking over a company that has been synonymous with losses for many years. Earlier this month, SSA raised $75 million from General Atlantic Partners to fill out its war chest for new acquisitions.

The Chicago, Illinois-based company aims to hoist revenue to an annual rate of $500 million by the end of this year. In the past, it has looked for more modest purchases to take it into new vertical niches, but the addition of Baan would move it into a different league and give it a strong base in the manufacturing industry.

Baan was a poorly managed, over-staffed company, leaking huge quantities of cash before Invensys brought its independent existence to an end. Initially, it appeared a good fit with Invensys' own focus on industry but Invensys lost the confidence of the investment community. While in the current climate Baan will fetch only a modest sum, there will be relief that someone else will have the headache of finding a way to make it profitable.