Why SAP is spending $7.3 bn to acquire a tiny Concur Technologies 

SAP is set to acquire US-based travel and expense (T&E) management software vendor Concur Technologies for $7.3 billion.

There are several reasons for buying Concur though it made pre-tax loss of $1.9 million in the third quarter of fiscal 2014 against pre-tax income of $6.8 million in the year-ago quarter. Net profit / loss was breakeven for the third quarter against net income of $2.8 million.

Concur is too small based on its revenue comparing with SAP.

Concur’s revenue for the fiscal third quarter ended in June rose 28.6 percent to $178.37 million. Concur has a revenue run rate of more than $700 million.

SAP said the per-share purchase price of $129 represents a 20 percent premium over the September 17 closing price and an enterprise value of approximately $8.3 billion.

The transaction will be funded from a credit facility agreement of up to €7 billion to cover the purchase price, target debt refinancing and acquisition-related costs.

SAP strategies to conquer biz network world

The German business software maker said the acquisition of Concur would enable SAP to increase its cloud users to 50 million from 38 million currently. SAP competes with IBM and others in the Cloud market. SAP will become the second largest cloud company by revenue.

Concur has more than 23,000 customers, 4,200 employees and 25 million active users in over 150 countries.

SAP said Concur is the leader in the multi-billion space for travel and expense (T&E) management software.

With Concur, SAP’s business network will transact more than $600 billion annually.

By delivering commerce across more than 25 different industries, SAP can address annual corporate travel spend of $1.2 trillion worldwide.

Concur has developed an open platform to connect the corporate travel ecosystem, such as airlines, hotels and car rental companies in new and innovative ways. The Concur acquisition will expand SAP’s business network to reach into the $1.2 trillion corporate travel spectrum.

SAP to buy Concur

With the addition of the corporate travel ecosystem to the Ariba and Fieldglass networks, SAP’s business network will have an opportunity to power transactions that drive more than US$10 trillion of global spend annually.

SAP applications touch two-thirds of global commerce.

The majority of SAP customers do not run Concur, presenting an opportunity to scale as part of the SAP franchise.

Only 30 percent of Concur customers currently run SAP, presenting an opportunity to introduce SAP to the Concur install base.

With the dominance of the mobile device in travel and entertainment, Concur will collaborate with SAP to build network-based, context-aware mobile applications.

SAP will migrate all its corporate travel and expense management to Concur’s integrated solutions.

“With the SAP HANA platform, the possibilities to innovate new business models around Concur and the network are limitless,” said Bill McDermott, CEO of SAP, in a statement.

Concur has 23,000 clients that include companies, governments and universities, with more than 25 million users of its business expense and travel management software and services.

SAP is competing with global rivals including IBM and Oracle to exploit surging demand for web-based software.

It expects to get 3 billion-3.5 billion euros in sales from cloud computing by 2017 out of a total of at least 22 billion, but McDermott said that SAP will raise the outlook after completion of the Concur acquisition.

Baburajan K
[email protected]