SAP’s Big Expensive Acquisitions

Enterprise software industry analyst and lovable curmudgeon Dennis Howlett wrote an interesting column earlier this month over at ZDNet recently and quoted me extensively.

Did SAP pay $3.4 billion for an out of control pup?

SEC filings show that SuccessFactors had internal control problems. How might this impact SAP results going forward?

SuccessFactors is a leader in cloud-based enterprise software for human resources activities. SAP paid $3.4 billion dollars for a company with about $300 million in annual revenues and that, in ten years of existence, had never made a profit. The premium over book value paid by SAP, $2.1 billion, has been recorded as goodwill, an intangible asset.

In May SAP also paid a big premium, 20%, to acquire Ariba for $4.5 billion, a software package I worked with extensively at BearingPoint in Latin America.

That’s a lot of goodwill on the books.

SAP’s auditor is KPMG.