(4) Acquisitions
In 2007, we acquired the outstanding shares of five unrelated companies and the net assets of two other unrelated businesses. The results of these acquired businesses have been included in our Consolidated Statements of Income since the respective acquisition dates. Acquisitions in 2007 were as follows:
| Acquired Businesses | Sector | Acquired business | Acquisition date |
| Pilot Software Inc., Mountain View, CA (USA) | Privately held provider of strategy management software | 100% of shares | 02/14/2007 |
| Wicom Communication Ltd, Espoo (Finland) | Privately held provider of all-IP contact center and enterprise communications software | 100% of shares | 05/07/2007 |
| MaXware AS, Lysaker (Norway) | Privately held provider of identity management software | 100% of shares | 05/21/2007 |
| OutlookSoft Corp., Stamford, CT (USA) | Privately held provider of integrated planning, budgeting, forecasting and consolidation software | 100% of shares | 6/1/2007 |
| YASU Technologies Private Ltd., India | Privately held leader in business rules management systems |
Asset purchase
|
10/18/2007 |
|
Arabian Company for Systems, Applications and Products in
Data Processing Ltd., Jeddah, Kingdom of Saudi Arabia
|
Privately held exclusive reseller of SAP software in the Arab
region
|
Asset purchase
|
10/31/2007 |
| Silk Europe N.V., Belgium | Privately held reseller of OutlookSoft software in Belgium and Netherlands | 100% of shares | 11/28/2007 |
These transactions were immaterial individually to SAP. The acquired businesses developed and/or sold software in specific areas with strategic interest to us. The aggregate purchase price of these acquisitions was paid in cash and amounted to €671 million net of cash received. It was allocated as follows: €172 million as identifiable intangible assets with estimated useful lives ranging from one to 12 years, €1 million as in-process research and development which was expensed at the respective acquisition date since the respective acquired technologies had no alternative future use, and €18 million net assets acquired. The remaining €480 million was allocated as goodwill, of which €205 million is expected to be fully deductible for tax purposes over an amortization period of up to 15 years.
With the purchase of the software license and support business of our exclusive partner SAP Arabia we also reacquired some contracts and rights, including our trademark and the existing exclusive distribution arrangement. The amount allocated to the reacquired software distribution right was €37 million (which is included in the above amount of acquired intangibles). The settlement of preexisting rights and contracts resulted in a settlement loss of €3 million and was recognized in Cost of sales and marketing.
In 2007, we acquired the remaining outstanding shares of our subsidiary SAP Systems Integration AG (“SAP SI”). We accounted for the acquisition of SAP SI shares using the purchase method. The aggregate purchase price for the SAP SI shares acquired in 2007 was €48 million, which was paid in cash. The purchase price was based on SAP’s cash offer of €38.83 per share which was made under the German Stock Corporation Act, section 327a, paragraph 1, “squeeze-out”. That provision entitled us, as the holder of at least 95% of the outstanding shares, to acquire for cash all remaining shares owned by the non-controlling shareholders. We allocated €9 million to minority interest, €2 million to identifiable intangible assets and €37 million of the aggregate purchase price to goodwill in the Consulting segment. The recorded goodwill is not tax deductible.Additionally, in 2007 we paid achieved milestones and earn-out considerations relating to prior years acquisitions and escrow returns with a net amount of €1 million resulting in a total net cash outflow of €672 million in 2007.
None of the purchase agreements provides for any contingent consideration to the former shareholders. We are still in the process of evaluating the assumed pre-acquisition contingencies particularly related to tax and customer contracts.
In connection with the 2007 transactions discussed above, we assigned the following amounts to identifiable intangible assets:
| Estimated useful lives | ||
| € millions | years | |
| Customer contracts | 51 | 4 to 12 |
| Intellectual property | 82 | 5 to 10 |
| Distribution right | 37 | 6 |
| Tradename | 4 | 1 to 2 |
| In-process research and development | 1 |
Expensed at the acquisition date
|
| Total | 175 |
|
The goodwill recognized in 2007 was assigned to our Product, Consulting, and Training segments in the amounts of €430 million, €76 million, and €14 million, respectively.
In October 2007 we announced our intention to acquire Business Objects S.A. (Nasdaq: BOBJ; Euronext Paris ISIN code: FR0004026250 – BOB) by way of a tender offer for the outstanding shares of Business Objects S.A.. This acquisition closed in the first quarter of 2008 and represents a material business combination. Business Objects S.A. is a provider of business intelligence solutions. Through a combination of technology, consulting, education services, and its partner network, Business Objects S.A. provides information and business decision making resources to small and large companies. Business Objects S.A. has dual headquarters in San Jose, California and Paris, France and its stock was traded on both the Nasdaq and Euronext Paris stock exchanges. The transaction took the form of a tender offer under French and United States law for all Business Objects S.A. common stock, all American depositary shares representing Business Objects S.A. common stock, and all convertible bonds and warrants issued by Business Objects S.A.. Under the terms and conditions of the tender offer agreement, we made a cash offer of €42.00 per common stock and the U.S. dollar equivalent of €42.00 per American depositary share determined using the euro to U.S. dollar exchange rate on settlement of the tender offers and of €50.65 per convertible bond, and a range of €12.01 to €24.96 per warrant, depending on the warrant grant date. After reaching the initial minimum tender condition of more than 50% as at January 21, 2008 the tender offer period was reopened under the same conditions until January 29 resulting in an ownership level of more than 95%. This allowed SAP to commence an immediate “squeeze-out” acquisition of the shares of the remaining shareholders. Taking into account estimated transaction costs we estimate the cost for acquiring Business Objects S.A. to slightly exceed €4.8 billion. The costs include the nominal value of the outstanding bond of approx. €0.5 billion which SAP acquired as part of the transactions. As a result the purchase price for equity related securities amounts to approximately €4.3 billion.
Based on preliminary valuations we expect to acquire assets of approximately €1.9 billion to €2.0 billion including identifiable intangible assets of approximately €0.9 billion and cash of around €0.8 billion. The assumed liabilities are expected to amount to €1.2 billion to €1.3 billion including the face value of the acquired convertible bond. We expect that goodwill resulting from this planned acquisition will be approximately €3.5 billion, which will not be tax deductible. Due to the fact that valuations of assets, liabilities and contingencies are ongoing the presented figures can still change significantly. The allocation of goodwill to our reportable segments will depend on our final management structure which has not yet been determined. The goodwill results from expected synergies and acquired workforce which are not identifiable intangible assets under SFAS 142, Goodwill and Other Intangible Assets (“SFAS 142”), and can therefore not be capitalized separately but are included in goodwill.
In 2006, we acquired the outstanding shares of three unrelated companies and the net assets of two other unrelated companies. The income of these acquired businesses has been included in our results since the respective acquisition dates. These transactions were immaterial individually to SAP. The acquired businesses developed and sold software that was deemed to be complementary to our business. The aggregate purchase price of these acquisitions was paid in cash and amounted to €491 million net of cash received and was allocated as follows: €133 million as identifiable intangible assets with estimated useful lives ranging from two to 11 years, €2 million as in-process research and development which was expensed at the respective acquisition dates since the respective acquired technologies had no alternative future use and €36 million as liabilities net of tangible assets acquired. The remaining €392 million was allocated to goodwill, of which €1 million is fully deductible for tax purposes over an amortization period of up to 15 years. The goodwill recognized in 2006 was assigned to our Product, Consulting, and Training segments in the amounts of €336 million, €39 million, and €17 million, respectively after minor adjustments related to the final allocation of purchase prices for prior year acquisitions that had not been finalized as of the previous year-end.
In connection with the 2006 transactions discussed above, we assigned the following amounts to identifiable intangible assets:
| Estimated useful lives | ||
| € millions | years | |
| Customer contracts | 17 | 2 to 11 |
| Intellectual property | 118 | 5 to 10 |
|
In-process research and development
|
2
|
Expensed at the acquisition date
|
| Total | 137 |
