SAP, Europe’s largest software company by sales, is to buy SuccessFactors, the provider of cloud-based human resource management software, for $3.4bn in cash, in an effort to make itself a “cloud powerhouse”.
SAP will pay $40 per share for the California-based company, which represents a 52 per cent premium over SuccessFactors’ closing price on Friday.
The deal will help boost SAP’s ability to offer software to companies as a service over the internet, something which the German company has been previously criticised for lacking.
SuccessFactors provides software that helps companies manage their workforce, hosted in remote data centres or “the cloud”. With 15m subscriptions at more than 3500 companies worldwide, it is believed to be the second largest cloud-based provider of enterprise software after Salesforce.com.
SAP’s own cloud-based offering, Business by Design, took longer-than-expected to develop and has seen relatively slow uptake among customers. “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,” said Bill McDermott, SAP’s co-chief executive.
Lars Dalgaard, the chief executive of SuccessFactors, will run SAP’s cloud business following the deal.
The transaction will be SAP’s largest since May last year, when the Walldorf-based company bought Sybased, its US peer, for $5.8bn. The deal also follows indications from Jim Snabe, SAP’s co-chief executive, said earlier this year that he was looking for further, big acquisitions after the company’s cash reserves had been boosted by nearly two years of strong trading.
The deal will be funded from SAP’s cash pile and a €1bn term loan facility. It is dependent on getting agreement from a majority of SuccessFactors’ shareholders.
SAP said the deal was expected to close in the first quarter of 2012 and would be slightly dilutive to SAP’s earnings per share next year.