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Analysts see Infor-Koch combo boosting ERP vendor

ERP vendor Infor will soon be a subsidiary of Koch Industries, a $110 billion multinational firm.

ERP vendor Infor will become a standalone subsidiary of multinational giant Koch Industries Inc., as a result of an acquisition agreement announced Tuesday. Koch is already a major investor of Infor's ERP systems as well as a large user of them. 

The Infor-Koch announcement has user benefits, according to analysts. First, it removes the uncertainty that came with Infor's planned IPO. Infor will remain privately held. 

Second, Koch's manufacturing experience will help with product development of Infor's ERP systems. Koch is expected to invest heavily in Infor, analysts say.

"In the long run, this will help Infor customers as Koch has deep pockets and is investing for growth," said Ray Wang, principal analyst at Constellation Research in Cupertino, Calif. "If Infor was to go public, the capital markets would punish Infor for any long-term bets and weaken the company in the short run."

Infor said that an affiliate of Koch Equity Development LLC, the investment arm of Koch, reached a deal to acquire the remaining equity stake held by Golden Gate Capital. 

One year ago, Koch Equity and Golden Gate made a $1.5 billion investment in Infor. The total deal was put at about $13 billion, said one person familiar with the agreement. Golden Gate is a private equity firm based in San Francisco.

Koch's business strategy has been to take companies private "and really invest in them," said Trevor White, analyst at Nucleus Research in Boston. 

Koch investment business model

White said the Infor-Koch acquisition is good for customers. Up until this point, users were wondering about the impacts of an IPO and if it would lead to cuts, he said. 

The Koch business model is to reinvest profits back into its subsidiaries, and "I don't see any reason why they wouldn't do that here," White said. 

Indeed, in an Infor-Koch statement about the deal, Kevin Samuelson, CEO at Infor, said that Koch "reinvests 90% of earnings back into its businesses."

Infor announced in 2017 that Koch Industries was implementing its CloudSuite product for financial and human capital management. Infor's major competitors include Oracle, Microsoft and SAP.

Koch products include some well-known brands, including Dixie and Brawny. It has a presence in energy, refining, electronics and mineral development. It employs nearly 130,000 globally, and about 67,000 in the U.S. Its annual revenue is over $110 billion. 

New York-based Infor employs about 17,000 and says it has about 68,000 customers. 

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