Concur is just the latest of SAP’s pricey plays in the cloud

Contact: Brenon Daly

Announcing the largest SaaS acquisition in history, SAP will pay $8.3bn for travel and expense management software provider Concur Technologies. The purchase comes as the German giant is on the hook for doubling its cloud revenue in 2015 – a corporate target that has driven SAP’s recent M&A.

In its 42-year history, SAP has announced seven acquisitions valued at $1bn or more, according to The 451 M&A KnowledgeBase . However, the five most recent deals have all been pickups of subscription-based software vendors. (SAP’s two consolidation plays for firms hawking software licenses came in 2007 and 2010, with Business Objects and Sybase, respectively.) The purchase of Concur is the Germany company’s largest acquisition, and the fifth-largest transaction in the software market overall.

More significantly, SAP is paying up as it tries to move to the cloud. Including the Concur buy, SAP has handed out a lavish multiple, on average, of 11x trailing revenue to its SaaS targets. (Obviously, revenue doesn’t fully reflect the economic value of multiyear contracts common at SaaS firms. But even on a more liberal measure of business activity such as bookings, SAP has paid double-digit multiples in its subscription-based acquisitions.)

The SaaS premium stands out even more when compared with the valuations SAP has paid for conventional license-based vendors. The purchases of both Business Objects and Sybase went off at slightly less than 5x trailing revenue, or half the average SaaS valuation. Further, SAP itself trades at less than half the valuation it has paid for its SaaS acquisitions.

SAP acquisitions, $1bn+

Date announced Target Software delivery model Deal value Price/revenue multiple
September 18, 2014 Concur Technologies Subscription $8.3bn 12.4
October 7, 2007 Business Objects License $6.8bn 4.7
May 12, 2010 Sybase License $6.1bn 4.8
May 22, 2012 Ariba Subscription $4.5bn 8.6
December 3, 2011 SuccessFactors Subscription $3.6bn 11.7
June 5, 2013 hybris Subscription $1.3bn 10.7*
March 26, 2014 Fieldglass Subscription $1bn* 11.8*

Source: The 451 M&A KnowledgeBase *451 Research estimate

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