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Commentary: Baan walks the tightrope with Invensys

Gartner believes that the news with Invensys is a warning signal to Baan customers looking for resolution to the company's viability problems.

    By Kenneth Brant, Gartner Analyst

    We believe that today's news is a warning signal to Baan customers looking for resolution to the company's viability problems.

    Investors should keep in mind that this deal may not be completed. Additionally, companies should prepare for the possibility of an uncertain future with an independent Baan or even a Baan acquired as a "cash cow."

    See news story:
    Invensys extends deadline on takeover offer
    A prolonged delay in closing the deal (anytime after Aug. 1) will hurt many Baan customers that deferred enterprise resource planning (ERP) backbone development plans as Baan sorted out its business propositions.

    Invensys' extension shows a significant minority of Baan shareholders does not agree with the current valuation of Baan assets. These shareholders continue to hold out in the hope that higher offers will appear. However, a bidding war that will significantly boost the purchase price is unlikely.

    Invensys remains committed to achieving at least 95 percent ownership so it can forcibly purchase the remaining Baan shares and demand Baan's removal from the Amsterdam Stock Exchange (ASE).

    Baan management has been unable to improve the company's financial performance, and the option to execute a new business plan is quickly deteriorating. Bankruptcy, an ASE delisting and negative shareholder equity would not only restrict Baan's access to capital markets and test customer loyalty, but would impede product development and harm customer service significantly--more than had Invensys been successful in its initial tender offer.

    (For related commentary providing comparison data on ERP vendors, including Baan, see registration required.)

    Entire contents, Copyright © 2000 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.