Industry cloud vendor Infor announced this week that it has entered into an agreement to sell its global Enterprise Asset Management (EAM) business to Hexagon AB, which specializes in digital reality solutions, combining sensor, software and autonomous tools. The deal is worth approximately £2.75 billion USD in a combination of cash and stock.
This might seem like a straightforward enough sell on the surface, but there's a more strategic agenda at play here that is worth diving into. The key points worth noting are:
Infor is owned by Koch Industries. Infor and Koch Equity Development are also going to build strategic relationships with Hexagon, once the EAM deal closes.
As a result of the transaction, Koch will also have an ownership stake in Hexagon and it's likely that President of Koch Equity Development, Brett Watson, will sit on Hexagon's Board of Directors as soon as feasible post-closing.
The ambition is to combine Infor's EAM technology with Hexagon's digital reality solutions, to create more sophisticated asset performance management (APM) solutions. Hexagon's knowledge in this field, plus its engineering talent, will allow the EAM business to dive deeper than it could at Infor.
Infor, Koch and Hexagon can then cross-sell a better product to its customer base and Infor can focus on developing its industry-focused CloudSuite.
As you can tell, there's a lot going on with this transaction and it appears from the outside that it fits a similar model that we've seen before from Koch Industries, whereby it seeks to invest in a company/product, scale it up with its industry knowledge, make use of it across its company portfolio, and then potentially buy it back if successful. Which is precisely the approach it took when it bought Infor a few years ago.
We got the chance to speak with Kevin Price, Technical Product Evangelist for Infor EAM about the deal, where he agrees that the transaction and the stake in Hexagon gives Koch Industries and Infor future opportunities to expand on the relationship. He says:
My opinion is that this definitely gives them options. And I agree with you, we've seen this before, not only with Infor, but with other companies. The mutual benefit of what EAM can do and what Hexagon can do is something that can afford their own customers and their own companies a big advantage. Having an investment like that, in addition to a cash offering, really makes it very attractive for them in many different ways. Just as when they did the same thing with Infor.
Building a better product
Price says that the EAM business at Infor suffered too much from being a horizontal play, at a company that focuses on verticals. The integrations required to serve the ERP business effectively, were not as great as serving customers that use EAM as a standalone product. Price adds:
So for us to take away that burden and have the opportunity given to Hexagon to have one single solution for asset management, where they don't have one now, is a benefit for EAM.
And thinking about EAM at Hexagon, having a more dedicated focus, more investment - focusing just on EAM capabilities, versus integration and other things [is a good thing]. And then from an Infor perspective, it frees up opportunities to focus on the nuances that make verticals tick.
Price notes that the EAM business has been building out tooling for many years that will first and foremost allow for selling into Hexagon's customer base at scale, rather than focusing on integrations with other solutions that aren't necessarily a great fit.
But it's the engineering talent at Hexagon that's particularly relevant to this deal. At Hexagon, EAM will get more dedicated investment and engineering time from a company that has a swathe of complementary solutions that play very well into the field of asset performance management when brought together. Price explains:
It's a platform for asset management, for predictive maintenance, even prescriptive maintenance. But you have to combine that with historical reference, maybe even OEM detail on how assets work, how they operate - you overlay that with a stethoscope to understand the asset.
The engineering aspect to that is not where we have played strongly because we don't own those people and don't own that environment. With Hexagon they already have a lot of engineering, they have the technologies, they have the hardware integrations - they just don't have the EAM platform. And as we build those out, we make the offering even more attractive to Infor, because now we can do a lot more things than we could do before. Now we have a really deep capability that we can go back to Infor with, with an even stronger cross-sell model.
Price notes that it gives Hexagon the EAM platform to grow into new areas in the future, in markets that are seeing strong demand - for example, digital twins, and product and asset lifecycle tools. For Infor, that's not a priority in terms of development and it's something that Hexagon already does well. Price adds:
I definitely think the opportunity for us is to focus on a lot of their visualization tools that are already strong. Digital twins, being able to visualize the equipment, to go into our customers and establish a 3D model of what they already have, being able to overlay that with our equipment history, perhaps overlay that with real-time monitoring - it's a no brainer in my opinion.
This is the holy grail that people are trying to chase, this is the holy grail in a lot of asset intensive industries, the one that they struggle to get to. If we can get them that visibility, not only the historical transactions of EAM, but the graphical visibility of them in the field, this is a very strong thing.
It's worth adding that Price said during our discussion that he anticipates very little disruption to customers as a result of this deal and that the sale to Hexagon will be an "additive" for them - there won't be a loss of functionality or service. This is about additional investment in the EAM platform, which should be a positive for customers. But as you can hopefully tell this isn't about a quick sale for cash. This is Infor and Koch banking on Hexagon improving the EAM platform and building out its capabilities, with its own complementary solutions, knowledge and engineering. The shift from more static EAM to real-time APM, which ties into what Price said about Hexagon's visualization capabilities, is the ambition here. If Hexagon get's that right, who knows, we may be speaking to Price again in a few years when Koch decides it's worth bringing it into the fold…