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Implications of SAP and Jive Ending Acquisition Talks

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As stated by Bloomberg, SAP (NYSE: SAP) has been in acquisition talks with Jive Software (NASDAQ: JIVE) recently. Bloomberg’s sources stated an acquisition will not go through because Jive’s products are too similar to those of SAP.

While none of these rumors have been confirmed and spokespersons have specifically refused to comment, shares of Jive surged on this news and are maintaining an elevated level with average volume.

This suggests that Jive’s software has the potential to seriously compete with SAP for market share. SAP recorded 2012 sales of $24 billion as compared to Jive’s $114 million. This statistic has especially positive implications as Jive’s sales are steadily rising, up 48 percent from 2011 to 2012 as compared to 16 percent increase for SAP. If Jive can fix its profitability issues, shares will rally.

One can also speculate talks ended because Jive is very confident with its product. Rather than working with SAP, Jive officials may rather compete with the tech giant. A famous rejection of this nature is Colman Mockler fighting off three hostile takeovers during his tenure as CEO of Gillette. Because he believed in the potential of his company, Mockler fought to maintain control of it, resulting in a huge increase of share price.

Another possible interpretation is that Jive thinks its shares are significantly more valuable than the market and SAP think they are. Valuation disagreements are of the most likely to cause deals to fall through.

Regardless of what this news really means, shares of Jive are trading up 4.56 percent to $16.50 and SAP is down 2.95 percent to $75.89.

Posted-In: BloombergNews Rumors M&A Trading Ideas


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