MAPICS to Acquire Frontstep

Deal would create largest global midrange ERP solution provider

Tempe, AZ  November 26, 2002  Enterprise software company MAPICS is acquiring fellow solution provider Frontstep in a deal that will combine the two companies' strong customer bases and could help them compete with larger suppliers of enterprise resource planning (ERP) systems amongst mid-market enterprises.

The combined company will have annual revenues in excess of $200 million out of the gate, along with existing implementations at more than 10,000 customer sites globally, placing the newly formed provider in the top ranks of midrange ERP solution providers.

Terms of the acquisition include the exchange of 4.2 million shares of MAPICS' common stock for all the outstanding shares of Columbus, Ohio-based Frontstep (formerly called Symix) and the assumption by MAPICS of Frontstep's debt and other liabilities. Shareholders in the two companies still must approve the deal.

In a statement, Alpharetta, Ga.-based MAPICS said the deal would create the largest provider of extended ERP, customer relationship management and supply chain management applications targeting discrete and batch process manufacturers.

Jim Shepherd, senior vice president and research fellow at technology consultancy AMR Research, wrote in a research alert on the acquisition that although the two companies have different technology platforms, "they should be able to share a great deal of intellectual property around product designs and functional requirements."

In addition, Shepherd suggested that the two providers will now be able to leverage their strong relationships with their respective technology partners. "MAPICS remains very close to IBM while Frontstep has partnered with Microsoft, and those are certainly going to be the two key platforms for the midrange," Shepherd wrote.

The analyst also believes that the merger will help MAPICS compete on both the IBM and Microsoft platforms. "[MAPICS] will continue to sell and enhance its products for the IBM i-Series (formerly AS/400) along with Frontstep's new SyteLine 7 product, which was recently rewritten on Microsoft's .NET architecture," Shepherd wrote. He also noted that the combined company currently has no plans to merge its products or force customers to switch solutions.

Dwight Klappich, senior program director of META Group and a 25-year manufacturing industry veteran, gave a similarly upbeat assessment of the deal, asserting that the larger size of the new company would make its solutions more attractive for enterprises wary of smaller, less financially stable providers.

"Companies, especially mid-market manufacturing companies, now rank supplier viability very high on their list of evaluation criteria; so it is imperative that suppliers demonstrate the ability to continually strengthen their organizations," Klappich said. "MAPICS' acquisition of Frontstep strengthens their organization by bringing together two established manufacturing-focused software companies that can now leverage a large combined customer base with new sales channels and complementary offerings."