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(CFOZone) By Denise Bedell-Bleeker
SAP's proposed $5.6 billion acquisition of Sybase could go a long way in helping the German business software provider compete more effectively with its leading competitor, Oracle. It could also fill some big gaps in its service offering, which would be good news for clients.
Sybase will provide SAP with mobile software and content delivery, and a comprehensive, easily-integrated database solution. The latter is particularly important in its drive to compete more effectively against Oracle.
Oracle accounted for 28.2 percent of the database market at year-end 2008, according to research from IDC, and Sybase had a distant second-highest market share, with 8.5 percent. SAP currently supports various database platforms and clients have access to Microsoft and IBM database offerings, but it has no in-house solution. In fact, a lot of SAP's clients use Oracle's database platform so the Sybase acquisition will allow SAP to offer a more comprehensive solution and keep clients out of the grasp of its main competitor.
The good thing about the Sybase in-memory database platform is that it is designed to integrate with existing on-disk databases, reducing a potential problem area when clients decide to use the Sybase offering as there is no need to re-enter data to access it through the new system.
Should the deal go forward – and there is still the possibility that a competing offer may come up – it will be one of the largest acquisitions that SAP has made in almost 20 years. The business software firm in March announced plans to overhaul its business to compete more effectively, and noted that it is open to both large- and small-scale acquisitions to achieve that goal.
A staple business service provider in the European market, SAP has put much of its M&A growth effort into building its US business in recent years. In fact, 97 percent of all SAP acquisitions since 1993 have been in the US, according to Thomson Reuters.
One issue may involve pricing. SAP is offering a 56 percent premium for Sybase, and would assume $400 million in debt. That raises a question as to how much of the financial benefits from the deal can be passed along to customers, or even whether prices will have to rise to reward shareholders.
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