SAP (SAP), Concur (CNQR) Deal Could Start Flurry of Cloud-Oriented M&A Activity - FBR (MSFT) (ORCL) (CRM)

FBR issues commentary on SAP (NYSE: SAP) and Concur (Nasdaq: CNQR) following news Thursday that SAP would move to acquire Concur for $129 per share.

Analyst Daniel Ives said: In light of last night's announcement that SAP entered into an agreement to acquire Concur Technologies, we believe the "stage is set" for the enterprise software deal landscape to heat up with this match-up potentially igniting the next phase of software consolidation which we expect to take place in 4Q/2015. In our opinion, the sector is ripe for massive consolidation as larger vendors (SAP, IBM, EMC, Oracle, Microsoft, salesforce.com) continue to seek to acquire their way into more fertile growth areas of the tech food chain. While some software stalwarts have taken advantage of attractive financing terms via large debt offerings over the past year, further increasing the size of their cash coffers, many are facing slower growth prospects on the heels of a sluggish IT spending environment, secular challenges, changes in buying behaviors among customers (move to a SaaS preference), and increased competition across the board. That said, with a myriad of hyper growth areas within the technology food chain such as big data, cybersecurity, and cloud computing, which have spawned some of the hottest growth companies seen in the software sector, we believe there is ample opportunity to generate “1+1=3” scenarios from cross-sell/upsell opportunities with smart strategic acquisitions in the space. In our view, the SAP/CNQR deal combined with an accelerating shift to the cloud/next-generation datacenter, and large stockpiles of cash earning virtually no returns, could translate into an M&A frenzy over the next 12 to 18 months. We highlight the following as potential M&A opportunities (in no particular order): (1) salesforce.com (NYSE: CRM) and Demandware (NYSE: DWRE), (2) EMC (NYSE: EMC) and Fortinet (Nasdaq: FTNT), (3) EMC and Proofpoint, (4) Microsoft (Nasdaq: MSFT) and Imperva, (5) Oracle and Verint, (6) IBM (NYSE: IBM) and Splunk (Nasdaq: SPLK), (7) SAP (NYSE: CRM) and Qlik (Nasdaq; QLIK), (8) SAP and Tableau (NYSE: DATA), (9) Workday (NYSE: WDAY) and Cornerstone OnDemand (Nasdaq: CSOD), and (10) Oracle (NYSE: ORCL) and NetSuite (NYSE: N).

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