SAP SE (ETR: SAP) agreed to buy Concur Technologies Inc. (Nasdaq: CNQR) for $7.4 billion in the biggest acquisition by the 42-year-old German software maker, months after Bill McDermott took over as sole chief executive officer.
In a boost to its cloud-computing business, SAP will pay $129 a share for Concur, 28 percent more than the stock’s Sept. 2 close, the day before Bloomberg reported the Bellevue, Washington-based company was exploring a sale with SAP. Shares of SAP fell as much as 3.2 percent in Frankfurt. The purchase will be funded from a credit line of as much as 7 billion euros ($9 billion), SAP said yesterday
McDermott is racing to add revenue from enterprise software delivered over the Internet as growth of traditional tools for managing finances and logistics has stalled. He’ll continue to face tough rivalry from Oracle Corp., which yesterday named Mark Hurd and Safra Catz as co-CEOs as Larry Ellison becomes executive chairman. Oracle has spent more than $50 billion on acquisitions.
“SAP and Oracle appear to be getting bolder in their M&A,” Brent Thill, an analyst at UBS AG, said in a note to clients. “This deal could accelerate the pace of M&A in cloud software.”
SAP shares fell 3 percent to 58.10 euros at 12:02 p.m. in Frankfurt trading. “SAP is paying a relatively high multiple for Concur, in our view, although acquisition-related multiples are in general relatively high for cloud-based transactions,” Knut Woller, an analyst at Baader Bank AG, who recommends buying the shares, said in a note.
Salesforce.com Inc. and Workday Inc. are other major providers of cloud computing, which lets companies use software delivered as a Web service rather than stored on their computers.
Concur’s software can book flights and submit or approve expenses on the Internet or mobile devices. It’s used by corporations including Google Inc., Kellogg Co. and Hess Corp., according to its website.
“This is one of the fastest growing software-as-a-service businesses in the world,” McDermott said in an interview on Bloomberg Television. “There is no No. 2 to Concur -- they essentially own this market.”
The transaction eclipses SAP’s $6.8 billion takeover of France’s Business Objects in 2007. BeforeConcur, SAP has spent more than $13 billion since 2010 on acquisitions, including suppliers of Web-delivered software of human resources and purchasing. The Walldorf, Germany-based company has struggled with slowing sales growth as it has developed as a cloud-based business-software provider. SAP acquired Ariba Inc. for $4.5 billion and SuccessFactors Inc. for $3.5 billion in deals that were completed in 2012.
SAP is paying nine times Concur’s ratio of enterprise value to estimated sales for next year, Thill said. That compares with the 8.1 times multiple it paid for SuccessFactors Inc., the 3.8 times it paid for Business Objects, and the 3.2 times value that Oracle paid for Sun Microsystems, Thill said.
Both Ariba and SAP’s March acquisition of Fieldglass, a U.S. software supplier that specializes in managing contract workforces, give SAP applications that could work well with Concur, according to a person familiar with the matter.
Earlier this month, SAP Chief Financial Officer Luka Mucic said revenue from the company’s Web-delivered programs will outpace traditional software licenses by 2020.
“There’s no debate anymore in the IT industry that the cloud will be the preferred consumption model,” Bernd Leukert, SAP’s software chief, said last month in an interview.
Including debt, the deal is valued at about $8.3 billion. The acquisition is expected to be completed by the first quarter of 2015, according to SAP’s statement.
Deutsche Bank advised SAP on the acquisition.