Tag: SAP

SAP’s next big deal?

Brenon Daly1 Comment

Earlier this week, SAP marked the first anniversary of its largest deal ever, the $6.8bn purchase of Business Objects. Now, some folks in the market are already lining up the next multibillion-dollar acquisition for the German giant. JMP Securities analyst Pat Walravens has floated the idea that SAP may be planning to buy data-warehouse titan Teradata. (Incidentally, Teradata celebrated its own first anniversary this week, having started trading on the NYSE on October 9, 2007.)

The pairing would make a fair amount of sense. We noted a year ago that SAP and Teradata have a deep partnership, sharing more than 200 customers. And SAP clearly needs more technological heft if it wants to sell a stand-alone data warehouse. (It currently offers its data warehouse as part of the NetWeaver BI integration stack.) But we have a hard time seeing SAP reaching for Teradata, which sports a $2.9bn market capitalization.

Typically, SAP doesn’t make consolidation plays like Teradata. (That’s the role of Oracle, which is likely to be less interested in Teradata since recently rolling out its high-end data-warehouse offering, HP Oracle Database Machine, which is its answer to the massively parallel-based warehouses offered by Teradata and others.) Instead, SAP generally favors small technology purchases, and one startup that we think would fit SAP pretty well is Greenplum. SAP thought well enough of Greenplum to put some money into its series C earlier this year.

However, SAP might find itself in competition for Greenplum with the startup’s other strategic investor, Sun. Greenplum has a data warehouse appliance for Sun servers. There’s also the alumni connection: Greenplum CEO Bill Cook worked for 19 years at Sun before running the startup. That said, Greenplum is not the only data-warehouse vendor Sun has invested in, having taken a minority investment in Infobright’s series C last month.

Happy Anniversary, baby

Brenon Daly

With SAP shares changing hands at their lowest level in four years, it seems a bit out place to think about Champagne being uncorked in Walldorf. Yet, we would note that it is the first anniversary of SAP’s landmark $6.8bn purchase of Business Objects. Fortunately for Business Objects shareholders, SAP used cash — rather than equity — to cover the price of its largest acquisition. (If Business Objects had taken SAP stock, their company would be worth just $4.4bn, rather than $6.8bn, based on SAP’s current valuation.) For the record, SAP didn’t cite any specific problems with Business Objects, but instead pointed to a ‘very sudden drop’ in overall business as it warned that third-quarter results will be weaker than expected.

Indian acquirers on the go

Announcing its largest deal ever, Indian systems integrator Infosys offered $753m in cash on Monday for SAP consultancy Axon Group. The deal is seen as a way for Infosys to build up its consulting business as well as its sales in Europe, where the UK’s Axon gets roughly 60% of its revenue. Pending shareholder and regulatory approval, the acquisition is slated to close in November. Some Axon shareholders, however, are holding out for more. Shares of the company on the London Stock Exchange have traded above Infosys’ offer price since the deal was announced.

Infosys’ acquisition of Axon would be the second-largest purchase by an Indian services shop, trailing only Covansys India’s $3.2bn purchase of business process outsourcing firm Fortune Infotech in 2005. In addition, the deal would bring to more than 60 the number of deals by Indian acquirers so far this year. That’s up from less than 20 per year in the first part of this decade. Meanwhile, M&A spending by Indian companies is likely to hit its highest level since 2005. Already this year, shoppers have spent $1.8bn on deals, which is within striking distance of the $2.1bn spent in all of 2007. This year’s M&A total will inch even closer to that tally if Axon shareholders succeed in pressing Infosys to up its offer.

Deals by Indian acquirers

Period Deal volume Deal value
Jan.-Aug. 2008 57 $1.8bn
Jan.-Dec. 2007 86 $2.1bn
Jan.-Dec. 2006 78 $672m
Jan.-Dec. 2005 38 $3.7bn
Jan.-Dec. 2004 7 $104m
Jan.-Dec. 2003 8 $132m
Jan.-Dec. 2002 16 $228m

Source: The 451 M&A KnowledgeBase

TomorrowNot

Brenon Daly1 Comment

There will be no more tomorrows for TomorrowNow. SAP, which bought the software maintenance provider in January 2005, said Monday it’s shuttering the division. Even though the German giant is killing off TomorrowNow, the lawsuit involving its subsidiary will live on. Recall that Oracle sued SAP more than a year ago, alleging TomorrowNow illegally downloaded information about Oracle’s support program. (SAP initially acquired TomorrowNow as a way to siphon off some of the rich maintenance stream that Oracle collects for supporting its application. Ironically, SAP launched the program with the title ‘Safe Passage.’)

Since the original lawsuit was filed in March 2007, the scope of it has broadened. Oracle is now seeking $1bn in damages. With TomorrowNow facing that kind of a hit, it’s perhaps not surprising that SAP, which had been shopping the division for several months now, found no willing buyer. We can only imagine the lengths that SAP must have gone through to write around the potential $1bn liability in putting together a pitch-book for TomorrowNow. However SAP worded the ‘for sale’ ad, it failed to generate any interest, even with the person who probably knows more about the business than anyone else.

Seth Ravin, who founded and ultimately sold TomorrowNow to SAP, has since moved on and founded a similar business supplying discounted support for ERP applications, Rimini Street. Although Rimini Street may have looked at bulking up through acquiring TomorrowNow, reports indicated that the company passed on a deal. We can only imagine how much SAP wishes it go back in time and pass on the TomorrowNow deal, which has brought it so much trouble.

Troubled timeline

Date Event
Jan. 2005 SAP acquires TomorrowNow
March 2007 Oracle sues SAP, alleging illegal corporate espionage
Nov. 2007 SAP looks to sell off TomorrowNow
April 2008 Oracle expands lawsuit
Feb. 2010 Case scheduled to be heard in court

Courting deals

Brenon Daly

Just how often is legal discovery a form of M&A due diligence? We asked ourselves that question on July 2 when IBM shelled out an undisclosed amount of money for Platform Solutions (PSI) after the two companies had battled each other in the courtroom since late 2006. Big Blue’s initial suit alleged patent infringement, while PSI’s countersuit raised questions of antitrust concerns.

Of course, we would never suggest that Big Blue simply bought off PSI, using its vast cash reserves to quiet a critic. And even if that was IBM’s motivation, we can hardly fault the company for determining that money spent to move its mainframe business ahead through acquisition has a higher potential ROI than just writing checks to lawyers.

With that case closed (as they say in the courtroom), we wonder if a similar scenario will play out at i2 Technologies. As we’ve noted in the past, the supply chain software vendor has run into a heap of problems, prompting it a year ago to hire JPMorgan to advise it on ‘strategic alternatives.’ One of those problems got resolved recently when SAP agreed to fork over $83m to settle a nearly two-year-old patent infringement suit. (To put i2’s legal windfall into perspective, consider that the settlement is twice as much as the company has earned in the past two years combined.) While we initially figured a buyout shop as the likely acquirer for i2, we now wonder if the settlement from SAP is merely a down payment on an acquisition of i2.

Courtroom drama

Parties Legal issue Outcome
IBM-Platform Solutions Patent infringement IBM acquires PSI, undisclosed amount
SAP-i2 Patent infringement SAP pays $83m settlement, all charges dropped

Source: The 451 M&A KnowledgeBase and SEC

Emerald Isle M&A

Brenon Daly

Given that today is Bloomsday, we’ve given ourselves literary license to take a look at deal flow between the US and Ireland. (Don’t worry, if you’re like us and have never actually managed to get through James Joyce’s ‘Ulysses’ – despite taking more than a few cracks at the tome – this Insight will still make sense. Quick show of hands: Who’s actually read all the way to “…and yes I said yes I will Yes”?)

In any case, deal-flow between the two countries has been remarkably stable during the past four years, clipping along at about 30 deals each year. M&A spending in the most-recent year, however, has fallen to its lowest level, just half the previous year and one-quarter the level in the year before that. (Note: In three weeks, we’ll publish our annual Trans-Atlantic Tech M&A Banking Review. Obviously, the steady decline of the US dollar has had a big influence in deal-making. So far, we’ve seen European acquirers be even more active than the previous year, while US buyers have only spent about half as much as the same period last year. You can request a copy of last year’s report here.)

One company that may very well figure into the US-Ireland M&A tally very shortly is Iona Technologies. We noted in February that the Dublin-based company had attracted an unsolicited bid from an unknown company, which turned out to be Germany’s Software AG. Iona has retained Lehman Brothers, which led its IPO in the late-1990s, to advise it. At the time, we tapped SAP and Sun Microsystems as the most-logical buyers of Iona. More recently, an Irish newspaper reported that Progress Software or Red Hat is Iona’s ‘preferred’ buyer. Meantime, Software AG now says it’s out of the running. So it looks like we could very well be seeing an American company pick up another piece of the Old Sod. 

Irish-US M&A (year ending each Bloomsday)

Period Deal volume Deal value
June 16 2004-05 28 $1.2bn
June 16 2005-06 29 $3.8bn
June 16 2006-07 36 $1bn
June 16 2007-08 33 $860m

Source: The 451 M&A KnowledgeBase