SAP, Europe’s largest software provider, made a formal, non-public takeover bid for US company BlackLine in June for $4.5 billion. According to information obtained by Reuters, the offer was rejected, but SAP is not giving up and is considering resuming talks. The deal, if it goes through, would be a key and strategic move in the war for dominance in the cloud financial software market.
The German giant, backed by advisers from JPMorgan, offered US$66 per share on 18 June, a 31% premium to BlackLine’s then 60-day average market price. SAP noted in its offer letter that the transaction would not require external financing.
However, BlackLine’s management, advised by Morgan Stanley, was not interested in a sale and rejected the offer. The offer came at a crucial time – just before the change in CEO, when Owen Ryan was taking over the reins of the company from founder Theresa Tucker.
Among the key players who would have a say in a potential sale is private equity fund Clearlake Capital, which owns a nearly 9% stake in BlackLine.
At first glance, the BlackLine acquisition is expected to strengthen SAP’s cloud finance suite, where the company is racing against rivals such as Oracle and Workday. However, deeper analysis points to a much more important, strategic objective: accelerating the migration of SAP’s own customers to the S/4HANA platform.
SAP has long struggled with the slow pace of adoption of its new cloud platform. A key concern for customers is the complexity of migrating and ‘cleaning’ financial data. BlackLine’s software specialises in exactly this – automating and simplifying accounting processes, preparing data for migration.
The two companies already share a close partnership. SAP resells BlackLine’s solutions, which generate nearly 30% of the US company’s annual revenue. Acquiring a partner would be a ‘logical extension’ of this relationship, as SAP CFO Dominik Asam put it. In practice, it would allow SAP to take control of a key tool removing a bottleneck in its own cloud transformation. SAP is now considering whether the strategic win is worth raising the price.
