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Did SAP Overpay for Ariba?

Posted by MGI Research
MGI Research
MGI Research Analyst Team
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on Thursday, 24 May 2012 in Cloud Computing

In a research note published last night - SAP Buys Ariba – A Fallen Angel Finds an Exit, we analyze the merits and metrics of this transaction and the impact on SAP customers, investors and competitors.

On May 22, 2012, SAP announced its intent to acquire Sunnyvale, CA-based Ariba, - a procurement software specialist. The purchase price of approximately $4.5 billion represents a premium of nearly 20 percent over Ariba’s closing price on May 21, 2012. This is an important deal that impacts SAP investors, the competitive landscape, and Ariba and SAP customers in both near and the long-term. Ariba is a one-time dot.com fallen angel whose stock price peaked above $1,012 only to crash below $6/share. For Ariba management and long-term shareholders, this is a major exit event and an unqualified success.

SAP’s intent to acquire Ariba underscores a fundamental change in the direction of SAP.  Five key questions define the analysis of this transaction:

  • Question One – Did SAP Overpay?
  • Question Two – How does this deal help SAP customers?
  • Question Three – How does this deal help SAP?
  • Question Four – What does this deal signal to SAP investors?
  • Question Five – What is the Impact on the Competitive Landscape?

This research note reviews opportunities and risks created when combining Ariba with SAP. We analyze the price paid, explore the implications for SAP and Ariba customers, and detail the impact on competitors and shareholders. The bottom-line for SAP customers and investors is not nearly as encouraging as it is for SAP competitors.

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© (c) 2012 MGI Research, LLC
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