4. Acquisitions
During the year ended December 31, 2003, SAP completed the following four acquisitions, which are immaterial individually:
- COPA GMBH, Wesel, Germany (“COPA”), specialized in providing IT architecture consulting services in Germany. SAP Systems Integration AG, Dresden, Germany (“SAP SI”) acquired the remaining 49.9% of the outstanding stock in January 2003. COPA was merged into SAP SI in January 2003.
- DCW Software AG & Co. KG, Mannheim, Germany (“DCW”), a German software provider specialized in Enterprise Resource Planning software for the midsize market. SAP AG acquired a controlling financial interest in November 2003. In January 2004 SAP AG exercised an option to acquire the remaining outstanding shares.
- SLI Consulting AG, based in Regensdorf, Switzerland (“SLI”), specialized in providing consulting services for medium-sized and large companies based in Switzerland. SAP SI acquired 100% of the outstanding stock in September 2003. SLI was merged into SAP Systems Integration (Schweiz) AG, Frauenfeld, Switzerland in November 2003.
- SPM Technologies Deutschland GMBH, Berlin/Germany (“SPM”), specialized in providing IT architecture consulting services in Germany. SAP SI acquired 100% of the outstanding stock in December 2003.
In addition SAP AG increased its ownership interest in SAP SI by approximately 2% in March 2003. All acquisitions have been accounted for using the purchase method and are included in SAP’s Consolidated Financial Statements since the date of acquisition. The aggregate purchase price of these acquisitions in 2003 was €63.2 million, of which €7.1 million was assigned to identifiable intangible assets and €49.9 million was recorded as goodwill, of which €10 million is expected to be fully deductible for tax purposes. The goodwill recognized in 2003 was assigned to the product and consulting segments in the amounts of €13.5 million and €36.4 million, respectively. The aggregate purchase price related to the 2003 acquisitions can increase by approximately €7 million if certain results are achieved subsequently by the acquired companies.
The values assigned to identifiable intangible assets were as follows:
During the year ended December 31, 2002, SAP completed certain acquisitions, which are immaterial individually and in the aggregate. These acquisitions have been accounted for using the purchase method and are included in SAP’s Consolidated Financial Statements since the date of acquisition. The aggregate purchase price of these acquisitions in 2002 was €36.8 million, of which €5.4 million was assigned to identifiable intangible assets and €20.5 million was recorded as goodwill.
In April 2001, SAP acquired 100% of the outstanding shares of TopTier Software, Inc. (“TopTier”), for approximately US$379 million in cash excluding cash acquired. TopTier, renamed SAP Portals Inc., specialized in technologies and know-how for creating enterprise portals. The TopTier acquisition advanced SAP’s strategy to strengthen the position in the enterprise portal market. Providing a high quality portal as part of SAP’s software solution should permit SAP to offer a better product to customers. The TopTier acquisition also provided SAP with a strong engineering staff that was experienced in the portal market and goodwill that included a large installed base of enterprise customers. The acquisition was accounted for using the purchase method and accordingly the operating results have been included in the Groups’ consolidated results of operations from the date of acquisition.
Based on their respective fair values, approximately €138 million of the purchase price was allocated to identifiable intangible assets including acquired technology, workforce, and trade names. In addition, approximately €6 million of the purchase price was allocated to acquired in-process R&D, which was expensed as of the acquisition date. Goodwill resulting from the purchase price allocation was approximately €278 million. Amounts paid to settle the portion of TopTier’s outstanding vested stock options are included in the purchase price. SAP agreed to compensate former TopTier employees for the unvested portion of such outstanding options based upon the original vesting schedule provided such employees remain continuously employed by the Company. These amounts are included as deferred compensation within shareholders’ equity and are recorded as compensation expense over the remaining vesting period.
From the second quarter of 2000 through August 2001, SAP made several investments in Commerce One, Inc. (“Commerce One”) resulting in a cumulative ownership interest of approximately 22% of Commerce One’s outstanding voting shares and the ability to exercise significant influence. See Note 2 for a description of the retroactive application of the equity method of accounting relating to acquisitions of Commerce One shares. SAP allocated the purchase price for each step in the cumulative acquisition based on the ownership percentage of Commerce One’s recorded net equity at such time. The cumulative purchase price allocation resulted in acquired intangibles totaling approximately €44 million including primarily software and technology, €11 million for in-process R&D, and €300 million of goodwill. As of December 31, 2002, the carrying value of SAP’s investment in Commerce One was reduced to zero as of result of the recognition of SAP’s equity in the losses of Commerce One since the initial investment date and the recognition of an other-than-temporary impairment charge of approximately €298 million in 2002.
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