SAP Drops $3.4 Billion To Acquire SuccessFactors, Expands Its Cloud

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News Posted: Sun, Dec 4 2011 3:34 PM
SAP is paying cash to acquire SuccessFactors for a reported $3.4 billion, which is a move that will add a great deal to SAP’s cloud portfolio. In fact, SuccessFactors is no small startup; the company boasts 3,500 customers in 168 countries and a total of 15 million subscription seats and posted a 77% year-over-year revenue growth in Q3 2011.

SuccessFactors will enable SAP to better deliver on its goals of offering on-premise, cloud, and mobile solutions.

“The depth and experience that SAP brings to customers via our cloud and on-premise portfolio fit elegantly with SuccessFactors’ world-class expertise in providing high-performing, low-cost, native cloud applications that customers are passionate about,” said Jim Hagemann Snabe, Co-CEO, SAP in a press release.

The transaction is expected to close in the first quarter of 2012.



SAP to Accelerate Cloud Strategy with Acquisition of SuccessFactors

Creates Global Cloud Leader with World-Class Applications, Technology and Expertise; Gains Immediate Scale and Momentum in Fast-Growing Cloud-based Human Capital Management Segment

SAP AG (NYSE: SAP) and SuccessFactors, Inc. (NYSE: SFSF) today announced that SAP’s subsidiary, SAP America., Inc., has entered into a definitive merger agreement with SuccessFactors, the market-leading provider of cloud-based human capital management (HCM) solutions, pursuant to which a subsidiary of SAP would offer to acquire all outstanding shares of common stock of SuccessFactors for $40.00/per share in cash, representing an enterprise value of approximately $3.4 billion. The acquisition will add SuccessFactors’ widely respected team and technology to SAP’s powerful cloud assets, significantly accelerating SAP’s momentum as a provider of cloud applications, platforms and infrastructure. The combination of SAP and SuccessFactors will establish an advanced end-to-end offering of cloud and on-premise solutions for managing all relevant business processes.

The SuccessFactors board of directors has unanimously approved the transaction. The per share purchase price represents a 52% premium both over the December 2nd closing price and the one month volume weighted average price per share. The transaction will be funded from SAP’s cash on hand and a €1 billion term loan facility. The closing of the tender offer is conditioned on SuccessFactors stockholders tendering at least a majority of the outstanding shares of SuccessFactors common stock (on a fully diluted basis) and clearances by relevant regulatory authorities. The transaction is expected to close in the first quarter of 2012 and be slightly dilutive to SAP’s Non-IFRS earnings per share in 2012 and accretive in subsequent years.

The acquisition marks another stride in SAP’s strategy of delivering solutions on premise, in the cloud and on mobile devices. It builds on a series of strategic moves in SAP’s targeted growth areas to drive innovation in its core applications and analytics; introduce breakthrough in memory technology; establish leadership in enterprise mobility; and grow its cloud portfolio. SuccessFactors’ solutions are highly complementary to SAP’s core HCM offerings as well as SAP’s strong cloud assets: SAP Business ByDesign for the suite cloud market and SAP’s line of business cloud offerings for large enterprises such as SAP Sales on Demand.

“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. The acquisition will help us address the top priority for CEOs globally – managing people and talent,” said Bill McDermott, Co-CEO, SAP. ”Together, SAP and SuccessFactors will create tremendous business value for customers, with potent synergies to accelerate our growth in the cloud.”

“The depth and experience that SAP brings to customers via our cloud and on-premise portfolio fit elegantly with SuccessFactors’ world-class expertise in providing high-performing, low-cost, native cloud applications that customers are passionate about,” said Jim Hagemann Snabe, Co-CEO, SAP. “Together, we will lead the industry in providing end-to-end solutions consistently to meet any deployment preference, whether on premise, in the cloud or on device.”

“This is a revolutionary combination of proven capabilities that will allow SuccessFactors to accelerate our roadmap by 10 years, and bring the world’s leading application knowledge and intellectual property to our customers through the cloud, and the largest applications customer base instantly,” said Lars Dalgaard, Founder and CEO, SuccessFactors.

“Expanding relationships with SAP’s 176,000 customers with our speed to value, friendly user interface, on mobile devices and the web, and seamlessly delivering more SAP solutions in the cloud will be legendary, as organizations adopt the cloud to improve their business. SuccessFactors has proven we have the technology and people to deliver the world’s biggest cloud deployments in terms of users and countries per customer, and also the most applications per customer from the same flexible scalable cloud platform. The business world is ready for enterprise-class cloud applications and together, we can deliver incredible new innovation for global businesses.”

SuccessFactors is believed to operate the largest scale of paying cloud users with 15 million subscription seats. With more than 3,500 customers in 168 countries, SuccessFactors is growing rapidly, recording 77 percent revenue growth year-over-year in the third quarter 2011 and 59 percent revenue growth year-over-year in the first nine months of 2011. SuccessFactors’ scalable cloud application platform supports organizations of all sizes from dozens to millions of users. With proven deployments in SAP environments at companies in diverse industries, the combination of SuccessFactors and SAP holds significant growth potential considering the more than 500 million employees of SAP customers and its 15,000 HCM deployments.

With headquarters in San Mateo, California, and more than 1,450 employees, the SuccessFactors team is widely regarded for creating innovative technology, generating more than 80 percent of new sales from applications that did not exist five years ago, and as one of the fastest growing leaders in cloud applications. Upon completion of the transaction, the CEO of SuccessFactors, Lars Dalgaard, will lead the cloud business of SAP in addition to his responsibility as CEO of SuccessFactors. SuccessFactors will remain independent and be named “SuccessFactors, an SAP company”. The chairman of SAP’s supervisory board, Hasso Plattner, recommended that Lars Dalgaard be appointed to the executive board of SAP AG.
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Xylem replied on Mon, Dec 5 2011 1:58 AM

Its nice to see all the big Cos consolidating! I've always liked these M&A's but its jus that the parent should do enough to retain the interest of the acquired co, So not like Palm n HP! And like Intel-McAfee.

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rapid1 replied on Mon, Dec 5 2011 8:30 AM

I agree completely Xylem this kind of combination specifically just points more to the mobile computing world to me. Of course we have fresh quad core smart phones and tablets coming up in roughly just over a months time at CES, and then of course following that by about 30 days at MWC as well. The world in general at least in the US most definitely is becoming online all the time more and more by the day it seems. Big combinations in that space industry wise like this one make it more and more viable as well as inevitable.

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gazd1 replied on Mon, Dec 5 2011 9:57 AM

I disagree with their takeover. If they're good enough, than sales will show. So I see this as trying to buy out other companies to make sure that they have less competition to compete with.

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gloriad1 replied on Mon, Dec 5 2011 10:41 AM

Yeah! Also I never did like that cloud concept at all.

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