Oracle announced last week that it acquired Taleo, a cloud-based talent management solutions provider, following in the footsteps of the industry’s largest SaaS acquisition ever – SuccessFactors/SAP. Taleo’s solutions help organizations attract, motivate and retain human capital. Founded in 1999, Taleo boasts 5,000 client companies, including names such as JP Morgan Chase, Starbucks, Best Buy, United Airlines, Dell and HP, and services nearly 16 billion transactions per year.
Oracle is paying $46 per share, valuing the deal at $1.9 billion, with a revenue multiple of 5.0x EV/C2012 and 4.3x EV/C2013, and a 30% premium over the 30-day trading price. The deal follows SAP’s December acquisition of employee performance management software provider SuccessFactors. SAP paid $3.4 billion for the company and 7.5x EV/2012 revenue, making it the largest SaaS acquisition to date.
Oracle expects Taleo’s portfolio of products to complement its existing offerings as the need for human capital management has become a strategic initiative for organizations. The acquisition will expand Oracle’s cloud capabilities by adding a large base of customers running Taleo’s cloud solutions and will also fill a recruiting functionality gap within Oracle’s Human Capital Management Fusion offering.
The acquisition represents Oracle’s second recent major purchase of a Web-based software provider, after acquiring RightNow Technologies in October 2011. Oracle already commands a suite of on-premise human capital management solutions, but the popularity of SuccessFactors, Taleo, Kenexa, Cornerstone and SumTotal Systems help validate the sector.
Oracle’s acquisition of Taleo and SAP’s acquisition of SuccessFactors may have positive implications for other SaaS companies as the acquisitions show continued interest by larger players in acquiring their smaller, faster growing SaaS competitors. Large legacy enterprise software players see the need to strengthen their cloud capabilities and vertical industry focus. Simultaneously, fast growing SaaS companies are facing margin pressure from having to increase their sales and distribution capacity to effectively market their solutions. Recent acquisitions at premium prices emphasize the urgency that the major enterprise application vendors feel for getting a handle on cloud applications.
– Ethan Cao, Associate