SAP (Nasdaq: SAP) made an uncharacteristic move yesterday by announcing that it is acquiring French company Business Objects (Nasdaq: BOBJ) for $6.78 Billion. The $59 a share price being offered is a 20% premium over Friday’s closing price for the Business Intelligence market leader.
I had said in an earlier column, that SAP’s strategy would most likely continue to be organic growth, since the company has so far been reluctant to take on large acquisitions, even as it has had major gaps in its Enterprise and Small Medium Enterprise (SME) portfolios. Today’s move, however, is a definite departure from that path.
Business Objects, which I wrote about just a month back, has done its own set of roll-ups, and acquired French company Cartesis in June and unstructured data provider Inxight a month later. Between October and December 2006, it acquired Armstrong Laing and Nsite in quick succession, having also acquired Firstlogic earlier. In a nutshell, Business Objects has been acquiring pieces that fill gaps in their BI portfolio, especially key strategic pieces that help them address On-Demand Business Intelligence and Unstructured Data analysis. The full analysis of all these acquisitions is available here, along with links to guest posts by Aberdeen Group analyst David Hatch.
So what has changed at SAP? Business Intelligence is clearly a market in which SAP needs to be present, and market alignment wise, this is a phenomenally good strategic move. The largest previous deal was in May when Oracle agreed to buy Hyperion for $3.3 billion.
What is intriguing, however, is SAP’s evolution to get to this point where they feel comfortable going for a large acquisition.
In March 2007, Hasso Plattner’s blue-eyed boy Shai Agassi left abruptly. Shai was widely believed to be the heir apparent at SAP. Henning Kagermann extended his contract to remain CEO. The question of succession planning, however, has been hanging over SAP, and Léo Apotheker, has since been named Deputy CEO. Léo Apotheker is a French executive, and has been head of sales at SAP over a long and successful tenure.
Meanwhile, Business Objects has, as WSJ reports, been shopping themselves around. Predictably, all those who play in Enterprise Software – IBM, Oracle, SAP – were interested, since building a full-fledged Business Intelligence suite from scratch at this stage of the game would be impossible.
Other BI players in the market include, most notably, Canadian company Cognos, whose On-Demand / Software-As-A-Service (my definition, Enterprise 3.0) strategy is less concrete. Business Objects is definitely a better acquisition target.
For SAP, the combination of this gaping BI hole in their portfolio, and the fact that Business Objects is a French company, hence easier to integrate with the German parent, makes this deal a good way to get its feet wet in a game that they would need to play quite a bit going forward. The fact that it is most certainly in Léo’s comfort zone helps.
Bottomline, SAP had to start learning the game of big acquisitions. This is a very good start. My guess is, coming up next is a Content Management acquisition, another gaping hole in their portfolio. The likely target is OpenText (Nasdaq: OTEX), a $1.4 Billion Canadian company, in 2008.