SAP, the listed German software company, could make acquisitions as part of its future strategy, chief executive Leo Apotheker told a German daily. In an interview with Boersen-Zeitung, he said SAP intends to pursue a balanced strategy, making innovations of its own while also continuing to consider buys. While in the third quarter of this year SAP made three small buys, Apotheker said a larger acquisition is possible if it makes strategic sense.
Asked whether SAP could consider getting a credit rating, with a view to raising acquisition financing from the bond market, Apotheker said he sees no need for that step. He explained that SAP recently placed a Schuldschein on the market successfully, and the banks that deal with such credits know SAP very well.
Asked whether SAP will take a greater role in sector consolidation, Apotheker observed that consolidation does not have to happen through acquisitions. He said it can also happen through organic growth. Apotheker said that about 70% of mergers and acquisitions in the software industry do not generate any added value. He said a good M&A strategy needs to be based on achieving synergies for customers and bringing extra value. Cost saving for its own sake is not enough, he said, as the operations of the companies also need to complement each other and their internal cultures need to fit.
The comments were made as part of a wider interview about SAP's strategy. In my opinion, squeezed out by Oracle’s industry consolidating moves, SAP has no choice but to aggressively pursue larger buys. While the CEO is right about caution in non-value generating acquisitions in the industry, that is mostly a company specific constraint than overall industry fact.