Despite reports to the contrary, Honeywell will not be acquiring supply-chain software vendor JDA. Rather, JDA has decided to accept a sizable infusion of private equity capital in a bid for organic growth. Here are the key details from JDA's announcement:
JDA Software Group, Inc. today announced that it has completed an agreement with funds managed by Blackstone (NYSE: BX) and New Mountain Capital (NMC) to effect a recapitalization of the company through a $570 million equity investment. The new capital will be used to fuel JDA’s product innovation and growth plans to deliver next generation cloud-based solutions and accelerate opportunities for current product development and enhancements.
The investment from Blackstone and NMC will allow JDA to accelerate its R&D investment by building the company’s next generation of cloud-based solutions on Google Cloud Platform, JDA’s strategic cloud partner of choice.
Earlier this year, JDA announced the general availability of JDA Retail.me, which is the first JDA SaaS solution built on Google Cloud Platform and is a result of JDA’s strategic collaboration with Google. JDA Retail.me has reinvented retail planning from the ground up and is the first of several planned applications JDA will be introducing as part of this next generation retail planning solution. This new capital investment will help JDA accelerate research and development to continue building JDA’s next generation of cloud-based solutions.
Analysis: An Independent JDA Is Better for the Installed Base
Honeywell's reported interest in JDA was viewed as on one hand, part of a general desire to move further into software, and in a broader sense part of its efforts to develop an IoT strategy that also leverages its manufacturing operations.
In the end, it's better for JDA customers that the company will remain privately held for now. "Most clients feel relieved that the acquirer was not Honeywell," says Constellation Research founder R "Ray" Wang. "There are limited solutions and platforms in the market and this means that JDA will still be an independent entity. The retail, supply chain, and commerce markets have consolidated and there are limited choices."
"A Honeywell acquisition would have made it difficult to get the same level of attention and investment that an independent software company could expect," Wang adds. "What is concerning is the number of software vendors acquired by private equity firms of late. Software is a lucrative business but the extraction of profits by PE firms signals a slowing of growth in enterprise software which means that we'll be seeing less overall innovation."
Epicor recently changed hands from one private equity firm to another in a reportedly $3.3 billion deal. At the time, company officials stressed that Epicor will benefit from increased investment moving forward.
The same should go for JDA, Wang says, but with a caveat. "In JDA's case, there will be more investment in innovation which they do need, but customers should be careful about the roadmap and voice their needs early in helping to shape the overall design."
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