Stronger together: Oracle-NetSuite merger
Cloud-based applications are the future of the tech industry today. From Microsoft Azure to Amazon Web Services, organizations are turning to cloud application companies to solidify their hold in future markets that may revolve around storing and analyzing big data. As part of this recent uptick in cloud application mergers, two key industry players have joined forces to tackle the industry in a dynamic new way.
Oracle recently announced that it will be acquiring NetSuite, the first ever cloud-based software company, in a deal valued at $9.3 billion. The Special Committee of Oracle's board of directors unanimously approved the terms of the deal and the transaction is expected to close in 2016.
Oracle CEO Mark Hurd described the two cloud-based applications as being "complementary" and happily coexisting in the marketplace, as the newly combined organization will heavily invest in both products in terms of distribution and engineering. Co-CEO Safra Catz expressed similar feelings and stated that this acquisition will be "immediately accretive to Oracle's earnings" in the first year after closing.
"NetSuite has been working for 18 years to develop a single system for running a business in the cloud," Evan Goldberg, founder, chief technology officer and chairman of NetSuite, explained. "This combination is a winner for NetSuite's customers, employees and partners."
Will the deal pay off?
For years, Oracle has been attempting to bolster its appeal in the cloud-based product market, which according to its fiscal fourth quarter earnings, only accounted for 8 percent of its total sales, Bloomberg reported. This acquisition of NetSuite offers the potential to not only allow the two companies to consolidate their financials, but to help Oracle properly compete against huge industry players like Salesforce and Microsoft.
Though both organizations have complementary offerings, NetSuite typically offers its services to smaller companies, which will broaden Oracle's traditional clientele base. The two companies also have a long history together, as NetSuite CEO Zach Nelson used to run Oracle's marketing operations during the 1990s. Furthermore, Oracle Co-founder Larry Ellison is NetSuite's largest investor.
"NetSuite is really pioneering cloud and this will certainly add to Oracle," Bill Kreher, an analyst at Edward Jones & Company, explained to Bloomberg. "I think acquisitions are certainly consistent with the company's long-term pedigree and strategy. You've got to pay for that type of growth."
This deal is subject to normal regulatory approvals and standard closing conditions. One of these closing conditions includes NetSuite stockholders tendering most of the company's outstanding shares in the offer. Furthermore, most of the outstanding shares not owned by executive officers, directors or affiliated personnel also will be tendered in the offer.
This deal comes after Oracle has lately been pursuing smaller-scale deals, such as the acquisitions of Opower and Textura in May of this year, which were valued at $532 million and $663 million, respectively.