SAP of Germany announced plans on Saturday to buy SuccessFactors, a Web-based enterprise software company, for $40 a share, or $3.4 billion.
The all-cash transaction, which is expected to close early next year, offers SuccessFactors’ shareholders a 52 percent premium above Friday’s closing price.
“The cloud is a core of SAP’s future growth, and the combination of SuccessFactors’ leadership team and technology with SAP will create a cloud powerhouse,” Bill McDermott, the co-chief executive of SAP, said in a statement on Saturday.
Deal activity is heating up in the enterprise software industry, as giants like SAP hunt for smaller companies that provide services through the so-called cloud. In late October, for instance, rival Oracle, agreed to purchase RightNow Technologies, a maker of customer service software, for $1.43 billion. It was Oracle’s largest acquisition, since the takeover of Sun Microsystems last year.
SuccessFactors, a provider of employee management software, helps companies assess the performance of their employees, manage recruitment and fulfill other human resource needs. The San Mateo, Calif.-based company, which reported revenue of $91.2 million in the third quarter, has more than 3,500 customers spread across nearly 170 countries.
The price of the transaction — a 61 percent premium to SuccessFactors’ 60-day trailing average — highlights the growing importance of Web-based enterprise software companies, as more businesses migrate to the cloud for cost-effective solutions. For decades, the industry has been dominated by installed software, which typically involves big upfront fees and recurring maintenance needs, because the software is hosted on-site.
Cloud-based software, in contrast, is designed to be more flexible. Web-based programs can easily scale, for small and larged-sized businesses, and can be offered on a subscription basis, that encompasses all upgrades and support.
“The premium is significant and it shows that SAP was struggling in its cloud strategy, especially in talent management,” Paul Hamerman, a Forrester analyst, said in an interview on Saturday. “The cloud has been a small part of SAP’s revenue stream, about 2 percent; the deal adds to the revenue base and shows SAP’s strong commitment to the software-as-a-service business model.”
In recent months, SAP has ramped up efforts to enlarge its presence in this market. Two months ago, for instance, it acquired Crossgate, a business-to-business e-commerce platform, that allows companies to exchange data with their partners.
Morgan Stanley served as the financial adviser to SuccessFactors, while JPMorgan Chase advised SAP.
Article source: http://feeds.nytimes.com/click.phdo?i=863bdb7cb774788eb1adc2470d47e11d