SuccessFactors to be acquired by Germany’s SAP AG

Pig knuckles and sauerkraut for everybody!

SuccessFactors, a provider of cloud-based human capital management solutions, announced that it had entered into a definitive agreement to be acquired by Germany's SAP AG (SAP) for $40 per share in cash, representing an enterprise value of approximately $3.4 billion. The takeout is a 52% premium and represents a price that is 6.2x and 38x EV/Revs and FCF based on C2013 estimates.

SAP says that the combination with SFSF will establish an advanced end-to-end offering of cloud and on-premise solutions for managing all relevant business processes. Analysts say the SFSF acquisition will provide SAP a much needed growth platform in the Software-as-a Service (SaaS) market, where it faces stiff competition from Oracle (ORCL).

SFSF board of directors has unanimously approved the transaction. The transaction is expected to close in the first quarter of 2012 and be slightly dilutive to SAP's Non-IFRS earnings per share in 2012 and accretive in subsequent years.

According to Canaccord Genuity Tech Analyst Richard Davis, barring a possible but still somewhat unlikely severe worldwide recession caused by Europe’s inability to address its fiscal crisis, 2012 should bring another good year for software companies, especially those with cloud architectures. Research firm Forrester, believes revenue in the cloud computing space could increase from approximately $41.0 billion in 2011 to $241.0 billion in 2020, while another firm, Gartner projects revenue of $148.8 billion by 2014, higher than Forrester’s forecast of $118.7 billion for the same period.

SuccessFactors (SFSF : NYSE : US$39.74), Net Change: 13.49, % Change: 51.39%, Volume: 93,938,031

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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