Investopedia: SAP Pays Up And Accelerates Its SaaS Development

One way or another, growth costs money. Large software companies, like Microsoft (Nasdaq: MSFT), Oracle (Nasdaq: ORCL) and International Business Machine (NYSE: IBM), spend piles of money on internal software development, but the reality is that the big boys still often have to bring out their wallets to compliment or compensate their own efforts. To that end, SAP AG (NYSE: SAP) is paying quite a lot for human resource software-as-a-service (SaaS) leader, SuccessFactors (NYSE: SFSF), but it would seem the alternative was even less appealing. (To know more about technology industry, read: A Primer On Investing In The Tech Industry. )


The Deal 
SAP announced over the weekend that it was acquiring SuccessFactors in an all-cash deal worth about $3.4 billion. SAP will pay SuccessFactors shareholders $40 a share, a 52% premium to the Dec. 2, 2011, close and near to the all-time high for the stock. SAP will initially pay for this deal with cash on hand and a loan.


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Investopedia: Oracle Expands Its Cloud Business ... RightNow

Oracle (Nasdaq:ORCL) has always been a notably acquisitive company, so it was really only a matter of time before they announced another meaningful deal. Likewise, the company is actively trying to build it out its cloud computing and software as a service (SaaS) business, and stay ahead of the likes of SAP (NYSE:SAP) and Salesforce.com (NYSE:CRM), so a deal in the SaaS space was likewise just a matter of time.


Those two timelines met on Monday morning, as Oracle announced that it had reached an agreement to acquire customer service specialist RightNow (Nasdaq:RNOW) in an all-cash deal.

The Deal
Oracle will be paying $43 per share in cash for RightNow. That works out to about a 20% premium to RightNow's prior closing price, and a total net price tag of about $1.5 billion - not exactly a huge deal for a company with $16 billion in net cash on the balance sheet, and over $5 billion of free cash flow in the last quarter. (Free cash flow is a great gauge of corporate health, but it's not immune to accounting trickery. For more, see Free Cash Flow: Free, But Not Always Easy.)


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