Following its acquisition by San Franciscobased Golden Gate Capital, Geac has entered into a major new phase—one in which it will no longer be known as “Geac.”
One of the longest-standing companies in the library-automation arena, Geac announced the estimated one-billion-dollar (U.S.) transaction on November 7, 2005. Geac has been a Canadian-based publicly traded company since the mid-1980s; it will be absorbed into the diverse holdings of Golden Gate Capital, a private equity firm. Company officials report the “Geac” name will be retired.
As a public company, Geac was traded on the NASDAQ Exchange (GEAC) and the Toronto Stock Exchange (GAC). Its buyer, Golden Gate Capital, is a private firm and ranks as a major financial organization, managing funds in excess of $2.5 billion. Details remain uncertain pending close of the transaction, which is expected in the first quarter of 2006.
The Geography of Geac
In Geac's earlier days, library automation represented a major portion of the company's business activity. Over the years the company grew into a large diversified organization with a variety of products, geared mostly toward enterprise-level financial-management systems for large corporations and automation solutions for many vertical industries. In addition to libraries, Geac's Industry Specific Applications (ISA) division produces software for local governments, public safety organizations, and restaurants.
Geac's Library Systems Division is a relatively small operating unit within the ISA section of the company; according to recent figures provided by Geac, ISA as a whole represents about nineteen percent of Geac's overall revenues, and the specific revenues from the Library Systems Division are a small portion of ISA.
Even though NASDAQ and TSE require reporting on overall revenues and earnings, the company has not disclosed financial information on individual units, such as the Library Systems Division, for many years. Few of the financial reports issued by Geac would include any mention of the Library Systems Division.
A Window Opening?
Although the sale of Geac to Golden Gate involves the demise of the company as a whole, it may represent a path to survival for its individual operating units. In recent years, Geac has mushroomed in size via the acquisition of many companies; the resulting assemblage proved to be an attractive candidate—over the course of the last five years, Geac's stock price had increased by 270 percent—for the even larger firm, Golden Gate Capital.
Golden Gate will disassemble Geac, merge parts of it into other businesses it already owns, and form, at last, one new wholly owned company. Geac's ERP products will be merged into a Golden Gate-owned company called “Infor.” Geac's financial applications and the entire ISA division will be spun off into a new, yet-to-be-named company, which will be wholly owned by Golden Gate. A new CEO will be named to head the new company, and each of the ISA divisions will continue to operate independently of each other as they did under the Geac name.
The shift from public to private, once a rare event, has become more common in recent years. Not only do the recent Sorbanes-Oxley regulations impose more stringent reporting practices and oversight, but many companies also feel that private ownership can give them more flexibility in management and better access to investors.Within the library automation arena, the acquisition of DRA by Sirsi Corporation serves as another example of a public- to-private transition.
The sale of Geac follows the resolution of a dispute with one of its major investors, Crescendo Partners (CP). CP had owned about five percent of Geac's stock, and because of CP company officials' concerns about the way Geac's company officials might handle future mergers and acquisitions, CP had gone as far as to attempt a proxy fight to gain one or more seats on Geac's board of directors. The dispute was resolved in advance of a proxy ballot, and the head of CP was voluntarily appointed to Geac's board; the sale of Geac went forward with the full support of Crescendo Partners.
Geac's Library-Automation Background
One of the early commercial companies involved in the library-automation industry, Geac, in the early 1980s, produced proprietary mainframe computer systems that provided automated-circulation capabilities for libraries. The Geac 8000 and 9000 automation systems stood among the leading products in the eighties. These systems were based on proprietary hardware and operating systems—a strategy that did not survive in the 1990s, as standardized hardware platforms and Unix-based applications became the norm.
By the mid-1980s, Geac experienced severe financial difficulties and had lapsed into receivership. The company emerged from receivership in October 1987 and resumed normal operations following a $16.2 million investment from the Canadian venture-capital firm Helix Corporation.
Given that the systems Geac developed were destined for obsolescence, the company bought its way back into the library-automation field through the acquisition of other companies with products that could extend Geac's reach into the future.
In August 1988, Geac purchased the Honolulu-based company ALII, which had developed a Unix-based automation system called “Advance.” Geac was successful in developing and marketing Advance in both North America and Europe, and by the mid-nineties, Geac had recovered as a company and had even achieved full financial health.
In December 1992, Geac acquired the company CLSI and its popular “Libs100PLUS” library-automation system. Geac subsequently renamed the product “PLUS” and continued to develop and market the system.
Geac's next acquisition occurred in early 1995 with the purchase of ODIS NV, a company based in Belgium that developed the VUBIS library-automation system. At the time of the acquisition, ODIS had sold VUBIS to about twenty-five libraries and took in about seven million dollars (U.S.) annually.
By the mid-1990s, the primary technology trend involved client/server-based automation systems. Both of Geac's major systems, ADVANCE and PLUS, followed more of a host/terminal approach. Geac announced its intentions to develop a new client/server system, to be called “Geos,” in June 1995. Those efforts moved slowly, and though Geac produced Web-based front ends and graphical clients for some if its modules, neither PLUS nor ADVANCE became full-fledged client server systems. Today, PLUS and ADVANCE are ranked among the legacy systems destined to be replaced.
With waning effort going into development of PLUS and ADVANCE, Geac instead focused its attentions on its VUBIS product line acquired from ODIN. The company developed multiple generations of VUBIS, culminating in the current product “Vubis Smart.”
Launched in April 2002, Vubis Smart has experienced steady sales—especially in Europe. The company recently announced it had exceeded 200 sales of Vubis Smart worldwide. Only a few of the sales have been in North America, though the company remains optimistic that Vubis Smart will gain ground in this market.
In the mean time, the customer base of both ADVANCE and PLUS continues to erode rapidly. At one point, these systems were used in thousands of libraries, and the annual maintenance payments represented significant income for Geac—even in the years when product sales had ceased and the company devoted limited resources to continued development of ADVANCE and PLUS.
A small number of libraries that haven't been able to secure funding for new automation systems will continue to run ADVANCE or PLUS for a few more years, but the vast majority of libraries that had previously installed PLUS or ADVANCE are migrating to new systems or have done so already. In North America, almost all of those libraries have gone with systems sold by Geac's competitors.
Impact on Geac Customer Libraries
The sale to Golden Gate may or may not have a drastic effect on the libraries that run Geac's automation products. The libraries still on ADVANCE and PLUS were well aware of the need to move on to a new system: the restructuring of the company bears no impact on that reality
The real question involves Vubis Smart. Will this product continue to be a viable into the future? Although the Geac name may go away, this product and the Geac Library Systems Division should survive in some form.
The plan announced by Golden Gate places the ISA within a new company structured much like it was under Geac. It remains within the realm of possibility that yet another company, one with more affinity for libraries, may acquire the Library Systems Division. If the Library Systems Division remains intact within the former Geac ISA, its prospects seem about the same as before the acquisition.
As noted above, the details of the structure of the company holding the former Geac Library Systems Division will not be known until the sale completes in early 2006. In the mean time, any predictions fall within the realm of speculation. Readers can expect an update early next year once this information becomes available.