SunGard to Hold Together in $11.3B BuyoutBy John Moore | Posted 2005-03-30 Email Print
The deal will help investors conduct mergers with less regulatory oversight, an analyst says.
The investor consortium aiming to acquire SunGard Data Systems Inc.announced Tuesday that, if the acquisition succeeds, it will keep the $3 billion IT software and services firm intact.
On Monday, Silver Lake Partners and six other private equity investment firms agreed to purchase the publicly traded SunGard for an estimated $11.3 billion.
SunGard's stock has climbed 10 percent since the announcement.
The stock was trading at $34.40 on Wednesday.
SunGard's core business lines—disaster recovery and software/processing services—will remain under one roof, according to Glenn Hutchins, a co-founder and managing member of Silver Lake Partners.
"The plan right now is to keep the two businesses together," said Glenn Hutchins, a cofounder and managing member of Silver Lake Partners, in an interview with Bloomberg TV.
"We think that both businesses are terrific businesses. Our goal and intent is to keep it together and build them together."
Past buyout targets, particularly in the "buy and bust" days of the 1980s, have been broken up and sold by their investors.
But SunGard's investors take a long-term view of the business, SunGard CEO Cristóbal Conde said.
"We believe the investors intend to hang on to SunGard as one piece for a very long time," Conde said during a conference call with industry analysts.
"This deal is not predicated on breakups or cutting cost," he added, describing the transaction as "all about growth."
Joining Silver Lake Partners in the deal are Bain Capital, The Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co. L.P., Providence Equity Partners and Texas Pacific Group.
Jeffrey Kaplan, managing partner of THINKstrategies, a Wellesley, Mass.-based strategic consulting firm, said SunGard's investors may employ the company as a "platform for possibly expanding the services portfolio."
SunGard currently offers software and data processing services to financial services customers. The company also provides disaster recovery and managed IT services such as hosting.
Colin Rankine, an analyst in Forrester Research Inc.'s Computing Infrastructure group, believes the investors are taking SunGard private to more readily pursue acquisitions.
The deal will help them "conduct mergers, acquisitions and reorganizations with a reduced burden of regulatory oversight," Rankine wrote in a research note.
Conde said the financial covenants underpinning the deal will provide enough flexibility to let SunGard "more aggressively" pursue acquisitions and other investments.
Next Page: Spin-off plans.
Ironically, it was a plan to split the company that prompted Silver Lakes' pursuit.
Last October, SunGard managers disclosed a plan to spin off its availability services business—which includes disaster recovery and other services—into a second publicly traded company.
Silver Lake approached SunGard's banker after that announcement, Conde said.
Hutchins told Bloomberg TV that SunGard fits his company's profile for investment candidates, which he described as "large technology companies that are market leaders."
Kaplan said the SunGard acquisition also signals the re-emergence of the IT services sector as ripe territory for investment opportunities.
Transactions in the business process outsourcing arena have been particularly plentiful.
Affiliated Computer Services' move earlier this month to acquire Mellon Financial Corp.'s human resources outsourcing business provides a recent example.
In managed services, Kaplan also cited IBM's acquisition of Corio Inc.and Sun Microsystems' purchase of outsourcing service provider SevenSpace as recent deals of note.
Rankine and other observers described the SunGard acquisition as the largest leveraged buyout since the RJR Nabisco deal in 1989.
SunGard management expects the transaction, subject to shareholder and regulatory approvals, to close in the third quarter.
Manhattan's Automotive Overhaul
Manhattan Associates Inc.has embarked on a supply chain automation project solution for an automotive supply company based in France.
The company will implement its Warehouse Management and Performance Management software for Norauto, a new customer for the Atlanta-based integrator.
Warehouse Management and Performance Management are components of Manhattan Associates' Integrated Logistics Solutions suite.
Norauto operates three warehouses in France and one in Spain.
Those facilities supply auto products to more than 350 retail outlets in Europe and South America.
A fifth warehouse will open later this year in Poland.
The Manhattan Associates' project is part of a multi-phase IT overhaul that Norauto launched in early 2004.
"Norauto wanted to achieve productivity improvements in its warehouse as well as use a scaleable system that would support the company as the business and order volumes grew," said Remy Malchirand, consulting manager for Manhattan Associates in France.
Deployment has begun at Norauto's warehouse in Lesquin, France.
That phase of the project involves the implementation of Manhattan Associates' Warehouse Management Solution for Open Systems.
The software will run on IBM's Unix-based eServer pSeries platform.
The warehouse application will be integrated into Norauto's SAP enterprise resource planning system.
Manhattan Associates' software also will be linked to Vocollect's voice-recognition technology.
In both cases, the applications will be integrated by Manhattan Associates' Enterprise Integration Services EIS, Malchirand said.
EIS is a multi-platform sub-system that enables applications to communicate with each other, according to the company.
In addition to the warehouse solution, Norauto will deploy Manhattan Associates' Performance Management product.
Performance Management helps companies track productivity levels and business trends, the company said.
At Norauto, the system will run on a Windows-based IBM eServer xSeries platform.
Next Page: CIBER goes to school.
CIBER Goes to School
Northern Kentucky University has tapped CIBER Enterprise Solutions to implement SAP software for the higher education vertical market.
Specifically, CIBER will install SAP for Higher Education & Research and SAP Campus Management.
The higher education software covers financials and human resources among other administrative areas.
The campus solution, meanwhile, provides a student information system that includes student records, recruitment and admissions.
CIBER will provide business process recommendations, map existing processes to SAP and convert legacy data to SAP.
Other services range from configuration to portal setup.
CIBER also will help integrate SAP with the university's third-party systems for course management, fund raising, and time and attendance.
Mike Dillon, vice president of CIBER Enterprise Solutions' PeopleSoft Practice, said the company intends to use SAP's NetWeaver technology "as much as possible to meet the integration/interface needs" of the university.
NetWeaver is SAP's integration platform, which supports Web services protocols.
CIBER may use a third-party integration tool to supplement NetWeaver in some situations, he added.
CIBER plans to have the core SAP Financial going into production in July 2006, with HR/Payroll going into production in January 2007.
The Campus Management modules will be phased in to support the Fall 2007 semester, according to CIBER's project timeline.
Dillon ranked higher education among CIBER's top ERP markets.
Dillon said the market, although limited to about 2,600 institutions, has room for growth "because the majority of those 2,600 have yet to make a decision on ERP applications."
The potential for global growth may be greater still, since "the benefits of ERP are just beginning to resonate with the global higher education community," Dillon said.
In the United Kingdom, the company has wins and active projects at the University of Cambridge, the University of Manchester and the University of Derby, according to Dillon.