Koch Industries' investment arm has just placed a massive bet on Infor, striking a deal that will provide the privately held ERP vendor with more than $2 billion in investment. Infor will use the money to expand its push into cloud-based ERP and industry applications. Here are the key details from the companies' announcement:
[Koch Equity Development]'s investment is strong validation of Infor's strategy and growth - a journey fueled by product investment, innovation, and an entrepreneurial culture. Koch Industries is an American multinational corporation that employs 100,000 people globally and is estimated by Forbes to be the second largest privately-held company in the United States with annual revenue of approximately $100 billion.
Infor became the first company to move mission critical industry applications to the cloud, and now counts more than 66 million users of its cloud applications. The company's double digit revenue growth in its most recent quarter was fueled by a 130% annual increase in SaaS revenue; more than half of Infor's software revenues are now derived from cloud applications.
One critical difference with Infor's cloud strategy is its reliance on Amazon Web Services for the underlying infrastructure, rather than running its own data centers. The company says this approach has freed up money to deliver more vertical capabilities. With the Koch investment, Infor is looking to take its cloud ERP offerings upmarket, judging from a statement by CEO Charles Phillips:
Some of the largest companies in the world have approached Infor looking for a modern alternative to the legacy options available for mission critical business applications. Infor has the scale and capital to provide a digital platform for the Global 5000.
Phillips took the Infor CEO job in 2010 after a long stint as president of Oracle. He's credited with transforming Infor from what was seen as a holding company for aging ERP products to a progressive enterprise software vendor focused on usability, "micro-vertical" capabilities, a flexible architecture and the ability to help customers with digital transformation projects.
Infor has invested more than $2 billion in research and development over the past five years, with its Cloudsuite product family now including more than 16,000 features. Those advancements notwithstanding, Infor still has a sizable legacy customer base it has yet to move onto the newest software. It has been encouraging these customers to do so through a number of migration programs in recent years.
Constellation Research estimates Infor's current market value at between $9.8 billion and $10.2 billion, based on public sources and internal analysis. KED's investment—which is apparently the largest it has ever made—will give it the right to appoint four of Infor's nine board seats. However, Infor's current shareholders, which include Golden Gate Capital, will maintain control of the company.
Koch Industries' holdings include Georgia-Pacific, Molex, Flint Hills Resources, Koch Pipeline, Koch Fertilizer, Koch Minerals and Matador Cattle Company. While Koch's businesses today are predominantly Oracle and SAP shops, the investment in Infor could prompt a move off of those systems to Infor over time, says Constellation Research founder and CEO R "Ray" Wang.
The investment will also give Infor the ability to heat up its merger and acquisition strategy, find new markets and ramp up R&D, Wang adds.
Nothing about the investment's terms precludes Infor from someday seeking an IPO, but it could make such a move harder, Wang says. Overall, though, Koch's stake has plenty of upsides. "Customers know Infor is in for the long haul," Wang says. "They have access to lots of capital for growth."
24/7 Access to Constellation Insights
Subscribe today for unrestricted access to expert analyst views on breaking news.
