Neal St. Anthony/On Business: Lawson measures up in tight IPO market
Neal St. Anthony
Tuesday, August 21, 2001
The pending Lawson Software initial public stock offering provides insight into the quality control that this year's stingy institutional buyers are requiring,
compared with the anything-goes on-ramp that closed last fall thanks to the collapse of many Internet and telecommunications stocks.
It would be the first Minnesota IPO this year. And it also could make early-stage investors very rich.
That's saying something for a technology company in a sector that has been clawed by market bears for the past 12 months.
"Lawson is profitable and has a long track record of strong fundamentals," said Dan Carr, a veteran observer of capital flows and chief executive of The
Collaborative, which hooks up emerging businesses with financiers. "I hope this represents the reopening of the capital markets after a very slow, difficult
year.
"PeopleSoft is one of the top-performing stocks in the country. And Lawson plays in the same space," Carr said.
PeopleSoft, a competitor, has risen from $15 to $36 per share during the past 24 months.
Only 66 companies around the country have gone public so far this year, compared with 357 through August 2000, according to financial data tracker
Bloomberg.
Last year's froth has been painfully wrung from the wallets of investors and investment bankers. The underwriters, who buy IPOs and promptly sell the
shares to individuals and institutions, can sell only very sustainable ventures in the wake of some of last year's speculative disappointments.
"This year, companies need revenue numbers of critical mass, profitability, a good customer list and the ability to 'scale' within your customers, an
application that's not just a one-trick pony," said Wade Massad, director of syndicate and corporate services in the equity capital markets group of Dain
Rauscher. "That's the ability to make more applications throughout the customer systems that will create recurring revenue."
Lawson hopes to raise up to $250 million through the sale of 14.6 million shares at $17 per share, less than 20 percent of the shares outstanding. That
indicates a total market value for the company of about $1.5 billion.
If the deal goes through at the price underwriters are banking on, Lawson would represent the seventh-largest public offering ever in Minnesota and likely
fall within the 30 largest publicly held companies in Minnesota based on market value.
The underwriters include Lehman Brothers, J.P. Morgan and U.S. Bancorp Piper Jaffray.
Lawson, a 2,000-employee firm, moved into new downtown St. Paul headquarters last year. The IPO has been anticipated for months.
Management isn't talking on the eve of "road shows" with analysts and investors designed to prime interest in the offering. But the offering was delayed in
part until Lawson could post its most recent fiscal-year results.
The 25-year-old firm earned a record $14.5 million, or 21 cents per share, on revenue that grew 22 percent to $383.9 million in the year ended May 31.
In Lawson's last round of private financing in February, TA Associates of Boston and Eden Prairie-based St. Paul Venture Capital purchased 6.1 million
shares of convertible preferred stock from the company and founding shareholders for $25.2 million, or $4.12 per share. The preferred stock is convertible
into common stock on a 1.387-to-1 basis.
That stands to be a huge return through the public offering.
The shareholders include founders and their families, including Richard Lawson (19.5 million shares) and John Cerullo (20.1 million shares). TA
Associates, a private equity investor, owns 7.7 million shares. An employee stock ownership plan owns 4 million shares.
The 12 directors and officers of the company own 30 million shares, which will represent about a third of outstanding shares after the offering, according to
filings with the Securities and Exchange Commission.
Chairman Richard Lawson, 57, was succeeded as chief executive by John (Jay) Coughlan in February. Coughlan, a veteran sales and operations executive,
became president of the company and a director in 2000.
Also in 2000, the company hired Robert Barbieri, 45, a public company veteran at Apogee Enterprises, as chief financial officer.
Lawson has stiff competition from bigger competitors such as Oracle, PeopleSoft and SAP, as well as from smaller niche players.
The company's success so far is rooted in venerable products and services targeted at a growing list of 2,000-plus customers in health care, retail,
professional services, financial services and government.
The so-called "enterprise software applications" market is expected to boom from $54 billion in sales in 1999 to $99 billion in 2004, according to
International Data Corp.
Lawson integrated systems enable employees to do everything from desktop enrollment in a 401(k) retirement plan, which automatically triggers payroll
changes, to helping health care organizations coordinate the order, payment and receipt of supplies from multiple vendors using one Internet Web portal.
He wrote the book
It's another first for Bill Rudelius, a nationally known professor of global marketing at the University of St. Thomas.
He's co-author of what is believed to be the first adaptation of a U.S. marketing text for Russian students, complete with Russian examples.
Rudelius, Steven Hartley of the University of Denver and Roger Kerin of Southern Methodist University just completed the Russian edition of
"Marketing," now in its sixth edition in America.
The Russian edition, hitting the bookstores this month, is 700 pages and chock full of illustrations, charts, graphs and real-life case studies. That's a
hit-and-miss proposition in Russia, where capitalism has benefitted a small minority of people over the decade-long experience so far.
"Finding uniquely Russian examples of marketing in action also was a challenge," said Rudelius, who also covers the experience of some American
companies there.
The authors encountered cultural and language challenges, in addition to the reluctance of some Russian companies to cooperate.
Jim Watkins, formerly chief executive of Golden Valley Microwave Foods and a student of Rudelius' at the University of Minnesota 30 years ago,
provided the inspiration and financing for the inaugural 10,000-copy run.
Watkins owns companies in several countries, including Russia. The book sells for about 600 rubles, or about $18 -- a lot of money in Russia.
The authors will forgo royalties in favor of grants for study-in-America programs for the colleges that use the texts.
-- Neal St. Anthony can be reached at 612-673-7144 or Nstanthony@startribune.com
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