Deal Focus: Oracle Acquires Taleo

February 16, 2012

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

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Posted by Signal Hill

Total EV Boosted By Mega-Deals In Q3

October 3, 2011

A number of multi-billion transactions pushed total aggregate M&A enterprise value to $48.2 billion for the Information Technology sector during Q3, its highest point since Q3 2007 ($51.2 billion), according deals tracked by Signal Hill. The third quarter boasts nine deals valued over $1 billion, as well as another 11 transactions valued between $500 million and $1 billion. Although the total number of deals ticked lower during the quarter, median deal size grew slightly compared to the first half of 2011, but remains below valuations witnessed at the end of 2010. Median revenue multiple also slipped a bit but is on the higher end of recent valuations, reinforcing the fact that deal activity is strong and healthy, strategic transactions still makes sense, even in a weak market.

As for buyers, private equity firms and cash-rich companies continue to make the biggest and most frequent plays. Four of the nine largest deals in Q3 involved financial buyers (Emdeon, GoDaddy, ConvergEx and Blackboard). However, while these buyers represent 14% of total EV, the transactions make up only 6% of total announced deals. Big firms remain the most active, particularly Google, which accounted for seven of the quarter’s 501 acquisitions. Xerox announced five acquisitions in the quarter (through its ACS and Global Imaging divisions), followed by Autodesk and Oracle, each with three deals.

Stay tuned for our Quarterly M&A Sector Reviews to be published later this week.

Quarterly IT M&A Deal Analysis, Q3 2010-Q3 2011q3 2011 it M&A transactions

* Signal Hill’s tracked Information Technology transactions include Enterprise Application Software, Internet, IT Security, IT Services, Financial Technology, Infrastructure Software, Mobile, IT Healthcare, CROs and research.

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Posted by Signal Hill

Deal Focus: Oracle To Acquire InQuira

August 8, 2011

Last week Oracle announced it was stepping up its game against rivals like Salesforce.com with the acquisition of InQuira, a provider of cloud-based customer service call center software. Oracle’s acquisition is yet another example of how competition within the Software as a Service (SaaS) and CRM spaces is igniting.

There have been 20 cloud CRM transactions announced since the beginning of 2011, not to mention seven deals in the call-center software space, according to Signal Hill data. While the majority of deal values were not disclosed, a handful of transactions pulled in significant premiums: Verint Systems paid 4.0x trailing revenue for Nediso last month while Salesforce.com paid 9.3x revenue for social CRM provider Radian6 at the end of Q1.

This is Oracle’s fourth acquisition, not to mention second cloud-related purchase, since the beginning of 2011. InQuira provides technology to improve customer service and satisfaction by helping customers find more relevant answers to questions online or from a service agent guided by a scalable knowledge management platform. The company, which has more than 85 customers including Yahoo, 3M, Sprint and AVIS, is expected to be the centerpiece of the Oracle Fusion CRM Service.

Considering the pace at which cloud computing is growing, we expect Oracle and other competitors – such as Microsoft, which launched its cloud-based Dynamics CRM Online earlier this year – to be on the lookout for strategic and value-add purchases through the remainder of the year.

Recent Cloud CRM Transactions

(click to enlarge)

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Posted by Signal Hill

Oracle Seeks Microchip Acquisition, Market Convergence Continues

October 19, 2010

Oracle chief Larry Ellison said recently that the company is considering acquiring a microchip company in order to build its intellectual property portfolio. Oracle’s hardware designs highlight growing interest in “cross-over” acquisitions that extend companies with defined cores into new areas.

In this vein, we have seen growing convergence among hardware and software vendors.  In August, Intel announced it would acquire security software giant McAfee for $7.6 billion, one of the biggest security deals ever and a prime example of this trend. Also in August, 3M agreed to pay $943 million for biometric hardware and solutions provider Cogent. And just last month, HP announced it would acquire ArcSight, a security and compliance management company for $1.5 billion, to complement its hardware and software infrastructure offerings. Google is also making multiple acquisitions, for example digital video specialists Episodic as well as mobile appointment company Plannr, to improve smartphone devices running its Android mobile OS.

Another type of IT convergence is among host/server and virtualization/data center businesses. In July, Dell acquired data center software provider Scalent, expanding its position in the data center market and further diversifying beyond laptop and desktop computers. Similarly, earlier this year CA acquired 3Tera in a move to extend its infrastructure software to the cloud.

Such bold diversification – hardware with software, and server with data center – seems to run counter to the divestiture trend also prominent in recent years as companies seek to slim down and focus (and raise cash), such as VeriSign’s shedding of multiple businesses to focus on its core carrier and internet services businesses.

Both trends, diversification and divestiture, exemplify fundamental realignment of IT tectonic plates, driving frenetic M&A activity along the edges of the shift. This will continue as the industry matures and winning strategies increasingly hinge on offering either best of breed (the best in well defined, discrete sectors) or best of need (complete customer solutions).

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Posted by Signal Hill

More Than Half of 2009 Top Tech Deals Are Software or Services

November 13, 2009
Software and Services account for more than 50% of largest tech deals and EV

The Wall Street Journal published a chart of the largest technology deals of 2009 yesterday and what was most notable was that more than half of the transactions were in software or services. While Oracle’s pending acquisition of Sun Microsystems still takes the top spot at $7.3 billion, software and services account for just over 54% of total enterprise value for all tech deals over $1 billion. The WSJ notes that this string of recent tech deals (11 deals have been announced in the second half of the year) is breathing life into “the once morbid M&A market,” as larger companies chase after growth through acquisitions.

Top Tech Deals of 2009


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Despite Economic Woes, Deals Are Still Being Struck

October 8, 2008

Lorie Roscitt

Lorie Roscitt

This Week Sees A Flurry Of IT M&A Activity

by Lorie Roscitt

While all attention is fixated on worldwide economic problems, M&A transactions continue to occur under the radar. This week alone, as stock markets around the world continue to decline, several significant deals have been struck — and at multiples favorable to the target companies. Furthermore, these transactions cut across all sectors that Updata Advisors covers.

For example, in the Internet sector, eBay announced Monday that it was spending over $1 billion to acquire three companies; two online classified websites in Denmark for $390 million and $945 million for Bill Me Later, Inc., a provider of online credit. eBay anticipates that Bill Me Later will generate an estimated $150 million in revenue in 2009, which represents a deal value multiple of 6.3x 2009 revenues. Not shabby.

In the IT services sector, Tata Consultancy Services today announced its intention to spend $505 million to acquire Citigroup Global Services, an India-based BPO firm which expects to generate revenues of approximately $278 million in 2008, representing a multiple of 1.8x 2008 revenues. This is above the 1.1x median trailing revenue multiple Updata Advisors has observed for companies in the BPO-sector over the past 12 months.

Also this morning, Symantec announced it has signed a definitive agreement to acquire MessageLabs, a SaaS-based provider of online messaging and Web security services for a purchase price of approximately $695 million in cash. MessageLabs generated approximately $145 million in revenue during fiscal year ending July 31, 2008, representing a multiple of 4.8x trailing revenues. This compares favorably to the median 2.0x revenue multiples paid for security companies and 3.5x paid for SaaS firms over the past year.

The financial technology sector also saw a deal struck this morning as Fundtech Ltd. announced the acquisition of Synergy Financial Systems Ltd. for $6.3 million (including earnouts) which had $2.5 million of trailing 12 months revenues, representing a trailing revenue multiple of 2.5x. Updata Advisors has observed a 2.1x median trailing revenue in the financial technology sector during the past year.

Finally, Oracle, who is already a serial buyer of companies, announced the acquisition of Primavera Software this morning. Primavera is a provider of project portfolio management (PPM) solutions. In this case, the deal value was not disclosed. In the past 12 months, Oracle has acquired 11 companies at a total cost exceeding $9 billion.

While these transactions are merely anecdotal and the volume of M&A transactions has clearly declined during the current economic and financial malaise, it is heartening to note that good things can happen during bad times.

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Posted by Signal Hill

Goliaths Go Down, Boutiques Rise Above

September 30, 2008

Francesca Bartolomey

Francesca Bartolomey

Smaller Investment Banks Poised To Win Deals And Talent As Larger Competitors Fall

While the US has been in the midst of the current financial crisis, much ink has been spilled over the deaths of investment banking behemoths and of Wall Street as we know it. But as Wall Street titans go down one after another, boutique investment banks that specialize in M&A advisory are well-positioned to reap the spoils. Although M&A deals already vastly outnumber initial public offerings as an exit strategy, this spread will likely expand as the market remains hostile to IPOs and more companies see their stock values fall pushing them into the arms of acquisitive tech vendors.

While valuations may fall as a result of the volatility of the stock market, it all may even out as more companies look to be sold to larger technology companies. And those large tech companies are still voracious buyers. As we have noted in a previous blog post, large technology companies such as Microsoft, HP, and Cisco have been taking advantage of the economic downturn by shopping for target companies in order to augment their growth and bolster their product offerings. What’s more, despite the events that have taken place on Wall Street since that post, some tech giants report that their M&A strategy will continue unabated. At OpenWorld, Oracle’s president Charles Phillips, Jr. suggested that Oracle will continue its aggressive acquisition strategy.

While it’s unclear whether the really huge deals (like HP’s $13.9 billion bid for EDS or Oracle’s $7.2 billion acquisition of BEA Systems) will increase or decrease in the current economic climate, it is possible that the next few quarters will see increased M&A activity in the smaller (couple hundred million) deal range. This is the sweet spot for boutique investment banks that specialize in mergers and acquisitions advisory. Additionally, top MBA talent is flocking to boutique investment banks as opportunities for employment dry up at their larger brethren. Armed with top talent and largely insulated from the credit crisis plaguing bigger banks, boutiques may well come out on top during this time of economic uncertainty.

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Posted by Signal Hill

Smooth Sailing for Oracle

January 16, 2008
Acquisition of BEA Systems Bodes Well for Strategic M&A in 2008

The financial buyers have stepped back and the stock market has dropped 20% from its late-summer 52-week highs, giving way for Oracle (ORCL) to offer $19.375 cash per share for BEA Systems (BEAS), a 24% one-day premium. This is Oracle’s second approach to BEA; the first was on October 12, 2007 when Oracle offered $17/share and BEA countered with a $21/share proposal, which ORCL walked away from. Oracle President and Chief Financial Officer Safra Catz noted that “this deal (should) be accretive to Oracle’s earnings by at least 1-2 cents on a non-GAAP basis in its first full year after closing.”

The activist investor Carl Icahn, who currently owns 13% of BEAS, said in a statement this morning, “This transaction is an excellent example of the great results that can be achieved for all constituencies when the shareholder activist is able to work cooperatively with management.”

An apparent win/win transaction for both parties bodes well for more strategic M&A to be navigated in 2008, in spite of choppy economic waters.

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Posted by Signal Hill

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