Contact: Brenon Daly
Over just the past two months, the two largest stand-alone human capital management (HCM) providers have been gobbled up by two of the largest software vendors. Back in December, it was SAP reaching across the Atlantic for SuccessFactors, while just yesterday Oracle announced its plan to take home Taleo. Both of the software giants paid the highest-ever stock price for their HCM targets, which will serve as key components of their cloud strategies.
But the valuations – both on an absolute and a relative basis – are strikingly different, with SAP valuing its HCM property almost twice as richly as Oracle. The specifics: SAP is paying $3.6bn for SuccessFactors, which works out to more than 11 times trailing sales, while Oracle is handing over $2bn, or slightly more than 6x trailing sales, for Taleo.
Why the disparity in the pricing of the two comparable deals? Well, for all of their similarities, there is one crucial difference between SuccessFactors and Taleo. Last year, SuccessFactors increased revenue by about 60%, twice the rate of growth at Taleo in 2011.