Enterprise software giant Baan Company appears to be distancing itself from venture capital arm Baan Investments after cutting criticism from US analysts and investors that they are too close for comfort.
Jan Baan, founder, chairman and chief executive of the Baan Company will relinquish his position as chief executive, and Tom Tinsley, managing director, president and chief operating officer, will be confirmed as president and chief executive officer, as discussed at the shareholder's meeting a few weeks ago.
Baan Investments BV (BIBV) is the private venture capital arm established by brothers Jan and Paul Baan, and it controls a 39 per cent stake in the Baan Company. BIBV runs companies that sell Baan's software and analysts are concerned about the Byzantine inter-company infrastructure, and the possibility that revenues might be artificially boosted through the BIBV connection.
The upshot is that BIBV is changing its name to Vanenburg Ventures BV, and it told the Wall Street Journal that "it wants to realise the value of its investments in Baan Business Systems (BBS) and sell its 85 per cent stake in Baan Midmarket Solutions (BMS)".
Vanenburg also wants "to eliminate any confusion in investors' minds about the independence of the venture capital firm from the software company?.
Baan Company NV is located in the Dutch town of Putten, at the same address as BIBV's beneficial owner, according to SEC filings. A glance at SEC documentation indicates why shareholders and analysts want to see a clearer structure imposed on the tangled web of companies.
In 1996 Baan decided to grow the proportion of indirect sales generated largely from small and medium enterprises (SMEs) and it now has around 150 SME channel partners, including "approximately 15 companies which are owned by BBS", in which the venture capital arm has an 85 per cent holding.
During 1996 and 1997, Baan "recognised revenues of approximately $4.5 million and $32.3 million [respectively] from BBS? from the licensing of Baan products". And in the same period, Baan "assigned a number of its SME licence contracts and trade accounts receivable to various BBS companies? which resulted in the license revenues of $10 million and $18 million".
Also in 1997 BBS Holdings paid ?$6.0 million and committed to pay an additional $2.7 million by March 1998 in exchange for? rights and obligations under a licence agreement with an unrelated third party."
Baan Midmarket Solutions (BMS) was formed in 1997, 85 per cent owned by BIBV, and again, Baan received "revenues of approximately $13 million in 1997 [and] revenues of approximately $3 million from sales to BMS for resale to third party users".
As part of the Baan's clear blue water strategy, Graham Sharman announced yesterday that he is resigning as a member of The Baan Company's Supervisory Board. Sharman, a Baan board member since 1995, was appointed president and managing director of Baan Investments in January 1998, and he continues in that position at the renamed Vanenburg Ventures.
Sharman has been a director of McKinsey & Co since 1984, and Professor of international distribution logistics at the Technical University of Eindhoven in The Netherlands since July 1994. Baan's new chief executive, Tom Tinsley, joined Baan in November 1995 also from McKinsey & Co, where he headed the firm's global information technology practice.
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