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Transaction
Case Studies

Peter A. Sokoloff & Co. regularly analyzes transactions which occur within the industries covered. An archive of these case studies is kept online as a courtesy to our colleagues. To receive by e-mail new case studies as they are prepared, please e-mail bwalko@sokoloffco.com with your contact information.

Archives > Transaction Case Study 76

SOKOLOFF & COMPANY CASE STUDY:
SAP Acquires Concur

DATE ANNOUNCED:  September 18, 2014
BUYER:  SAP (NYSE: SAP SE)
SELLER:   Concur Technologies, Inc. (Nasdaq: CNQR)
PURCHASE PRICE:  $7.36 Billion
FORM OF PURCHASE PRICE: Cash

SELLER’S FINANCIAL INFORMATION AND M&A MULTIPLES

Year 2012 2013 Trailing Twelve Months
through
June 30, 2014

Revenue

$439.83

$545.80M

$667.89M

EBITDA

$75.25M

$93.08M

$92.29M

Cash

 

 

$816.37M

Debt

 

 

$673.01M

Purchase Price

 

 

$7.36B

Enterprise Value

 

 

$8.3B

Multiple of Revenue

 

 

12.43

Multiple of EBITDA

 

 

89.93

TRANSACTION DRIVERS: 
SAP is looking to round out its cloud services business and the purchase of Concur will make them the second largest cloud vendor by revenue.  Together the two companies will have more than 50 million users in the cloud.  Further, only 30% of Concur customers run SAP creating a dynamic opportunity to install SAP innovations into the Concur base.

SAP CEO, Bill McDermott said “The acquisition of Concur is consistent with our relentless focus on the business network. We are making a bold move to innovate the future of business within and between companies. With Ariba, Fieldglass and Concur, SAP is the undisputed business network company.”
Concur CEO, Steve Singh also stated that the combination of the two companies will “bring together the leading cloud-based Travel and Expense platform with the market leading enterprise application software company, and we expect this union to drive significant value for our customers.”

SOKOLOFF COMMENTARY:
Some analysts are raving that SAP is paying too much!  Any intelligent B-School graduate with even a modest understanding of software companies sees the financial value proposition here.  Concur is pouring on the coals to build dominant market share.  At its current rate of growth it will pass the $1 billion revenue mark in as little as three years.  The company generates nearly 70% gross profit.  Right now, the EBITDA margin is a paltry 14%.  Fast forward to the billion dollar mark and, even if it remained as a standalone business, that EBITDA margin will approach 40%.  That drops the future standalone multiple to 15x.  Overlay SAP’s global sales and marketing strength, administrative, technology and customer synergies and SAP will likely see even greater revenue and EBITDA growth from CNQR.  Smart money will bet that this will become an accretive transaction for SAP in just a few short years.
Factor in the current low cost of capital and SAP has a clear winner.  Congratulations to Bill McDermott for daring to look past the next quarter – a terrific acquisition for SAP!

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