ANALYSIS: SAP SE to Buy Concur Technologies Inc, By the Numbers

While it’s been rumored for over a month, SAP has finally pulled the trigger on acquiring Concur. The terms of the deal represent a material market premium to Concur’s recent trading range. The purchase price of $129 per share is a 20% premium to yesterday’s closing price. The overall valuation the acquisition places on Concur – $8.3 billion – represents more than a 10X forward revenue multiple based on Concur’s current run rate of approximately $180MM per quarter. Concur is not profitable.

The deal represents a continuation of SAP’s track record of paying a premium for leading software as a service (SaaS) or cloud assets in the enterprise software market. Previously, SAP has acquired Ariba and Fieldglass (both in related markets to Concur) as well as SuccessFactors at premium market valuations. SAP has noted that this transaction will be funded through a pending credit facility.

In a previous Spend Matters PRO research brief, Why SAP Should — Or Should Not — Buy Concur, we provided a number of positive and negative implications of a potential acquisition. Here are a few of the highlights:

  •  “The German dismantler risk … One concern is that Concur’s solutions, the strong partner network, and the quick-paced delivery model will be swallowed up and chewed to bits by SAP. It’s happened in the past – reference Ariba is Now a Product, Not a Company."
  • “Concur has grown up with intimate knowledge of end users and their needs, partners, and their capabilities. SAP on the other hand has long operated far removed from end users, with a large cloud of systems integrators and consulting firms protecting them from the cold winds of end user preferences.”
  • “Price point mismatch – Concur is a low-cost-of-entry solution, albeit with a scalable upside ... We have seen how an acquisition by SAP quickly and considerably hikes subscription fees upwards.”
  • “T&E is a strange hybrid of business process (employee-expense-report-based expense management) and spend category (reference this story). T&E jumped the rails and abandoned e-procurement over a decade ago. Note that you can't do proper expense management without also doing P2P and even S2S – so intimate ties to a broader procurement and financial stack is inevitable in a more strategic rollout.”
  • “Expanding cloud – SAP continues to buy its way into the cloud (the need to “feed the quarterly [growth] report beast” – even though none of the clouds talk to each other very well. (In a sense, SAP continues with an Infor strategy – take a look at our article Don’t Fall for the Myth of Integrated ERP Procurement for more details on that.)”

Here are a few additional details from the announcement on SAP’s site as well as during the analyst call (which took place at 6:00 PM ET) tonight:

  • "SAP’s business network will transact over $600 billion annually. We estimate SAP’s applications touch two-thirds of global commerce.”
  • “SAP’s business network – the world’s largest – will transact more than US$600 billion annually … across more than 25 different industries and address annual corporate travel spend of US$1.2 trillion worldwide.”
  • “Concur has developed an open platform to connect the corporate travel ecosystem, such as airlines, hotels and car rental companies in new and innovative ways.”
  • “With the addition of the corporate travel ecosystem to the Ariba and Fieldglass networks, SAP’s business network will have an opportunity to power transactions that drive more than US$10 trillion of global spend annually.”
  • “Together the two companies will have more than 50 million users in the cloud.”
  • “The majority of SAP customers do not run Concur, presenting a clear opportunity to scale as part of the SAP franchise.”
  • “Only 30% of Concur customers currently run SAP, presenting a dynamic opportunity to introduce SAP innovations to the Concur install base.”

SAP noted on the analyst call that, “We are expanding the world’s largest business network … between companies and people [emphasis added.]” Further, “Ariba’s business network was the first step … with Fieldglass we expanded the network to contingent workforces … [and] With Concur, we are expanding to the $1.2 trillion travel category.”

Spend Matters PRO will provide even deeper analysis around the transaction for our subscribers in the next 24 hours. We would also not entirely rule out a counteroffer from Oracle (<20% probability) for a variety of reasons, yet at the same time, our insight into Oracle’s corporate development process and past transactions suggests any counteroffer would represent a break with Oracle’s typical valuation multiple comfort level.

* Here's our first follow-up: SAP Buys Concur for $8.3B – A Great Deal (But Out of Necessity, Not Strength)

Related Research (Concur):

Related Research (SAP and Fieldglass)

Related Research (SAP and Ariba)

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