Seeing many companies outsourcing production to multiple contract manufacturers, business operations software company Infor Inc. has agreed to pay $675 million for GT Nexus, a major Internet-based procurement network used by global companies like Caterpillar, Procter & Gamble and Levi Strauss & Co. to order manufactured products they sell to customers.
Infor sells enterprise resource planning, or ERP, software that companies use for such tasks as managing their inventory and financial records. Its clients include apparel brands, aerospace, technology and pharmaceutical businesses, including many that also use GT Nexus to procure products from suppliers.
The acquisition will enable Infor to offer its clients “end-to-end” transparency in item design, manufacture and shipping, says James Cooke, a principal analyst at Nucleus Research who covers supply chain management software. That will provide Infor’s manufacturing customers better visibility into the design, production and shipping of products across multiple suppliers, he adds. Infor’s interest in GT Nexus reflects modern manufacturing’s trend of outsourcing item production to multiple companies based in many locations, Cooke says.
“Infor is trying to move away from being an ERP solution that is just used within the four walls of one company,” he says. “Infor wants to be a global supply chain solution that can be used for multiple companies.”
Cooke says the acquisition will position Infor to better compete with business software provider SAP SE, which also provides cloud-based supply chain management software along with ERP systems.
It will also give Infor the basis for a “supply chain control tower,” he says. That is a central online data hub that houses the required technology, organization and processes to capture and use supply chain information. This provides users with information, for example, on how an ordered product is proceeding through design, production and delivery, enabling companies to see any disruptions and plan accordingly. If companies see that production of an item is being delayed on the factory floor or in shipment, it can take such steps as arranging for production in an alternate facility or delaying a planned promotion.
“You want to be a demand-driven supply chain,” Cooke says. “You need end-to-end view of demand signals, and be able to act on them. You need to know what materials suppliers have on hand, if you’re a retailer and suddenly demand for a certain product takes off. Or, if there’s a political event that causes a disruption, you need to be able to make a course correction for where your product will be manufactured.”
“In a complex, high-velocity supply chain, all partners need to know what was ordered, when it was built, where it is in transit, if the order has changed, and has it cleared customs,” Infor CEO Charles Phillips says.
Approximately 25,000 businesses use GT Nexus, including major retailers like The Home Depot Inc. GT Nexus already facilitates more than $20 billion in payments between buyers and their suppliers across 90 countries in eight currencies, the company says. The two companies declined to comment on whether any employees would be laid off as a result of the acquisition.
Credit Suisse and Bank of America Merrill Lynch served as financial advisors to Infor in connection with the transaction. Law firms Gibson, Dunn & Crutcher LLP and Kirkland & Ellis LLP served as Infor’s outside legal counsel. GT Nexus was advised on the transaction by Morgan Stanley; Wilson Sonsini, Goodrich & Rosati; Cleary Gottlieb Steen & Hamilton LLP and management consulting firm KPMG.
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