SAP subsidiary, SAP America Inc., has agreed to acquire Sunnyvale, Calif.-based Ariba, a cloud-based business commerce network, for approximately $4.3 billion. The acquisition will help the companies create new models for business-to-business collaboration in the cloud.
The per-share purchase price represents a 20 percent premium over the May 21 closing price and will be funded from SAP’s free cash and a $3.02 billion term loan facility. The transaction is expected to close in the third quarter of 2012.
SAP will be acquiring the market leader in cloud-based collaborative business commerce. SAP’s entry into the inter-enterprise business network space expands its growth opportunities and accelerates its momentum in the cloud, for which it revealed its road map last week. SAP's cloud applications business (Software-as-a-Service) will focus on managing customers, suppliers, employees, and financials, in addition to its cloud suite offerings: SAP Business ByDesign and SAP Business One. The acquisition will also boost SAP’s cloud applications portfolio with the addition of Ariba’s leading cloud-based procurement solutions.
Ariba has approximately 2,600 employees. It has $444 million in total revenue and grew by 38.5 percent in 2011. Its business network recorded 62 percent organic growth in the same period.
SAP co-CEOs Bill McDermott and Jim Hagemann Snabe said cloud-based collaboration is redefining business network innovation, and that the company is catching this wave in the early stage of its evolution.
"The addition of Ariba will create the business network of the future, deliver immediate value to our customers and provide another solid engine for driving SAP’s growth in the cloud," they said.
Carter Lusher, chief IT Analyst at Ovum, said this acquisition is less about Ariba’s global trading network than a “talent grab" about the business issues of cloud computing and technical insights on developing applications for the cloud. However, there are other motivations, he said, including marketplace factors like acquiring customers and revenue stream and moving into adjacent markets in addition to building block factors like sales team headcount, technology R&D talent, and filling a product gap.
“This is a logical step for SAP as it needs to accelerate its move into the cloud," Lusher said. "This acquisition is consistent with SAP’s overall M&A strategy and complements the SuccessFactors acquisition in December – providing greater depth of products, executives, and tech talent for the cloud."