By Adam E. John

SAP has entered into a definitive merger agreement with SuccessFactors, a provider of cloud-based human capital management (HCM) solutions for roughly $3.4 billion. Pursuant the agreement a subsidiary of SAP would offer to acquire all outstanding shares of common stock of SuccessFactors for $40.00 per share in cash. The transaction will be funded from SAP’s cash on hand and a €1 billion term loan facility.

The SuccessFactors board of directors has unanimously approved the transaction. The per share purchase price represents a 52 per cent premium both over the December 2nd closing price and the one month volume weighted average price per share.

The transaction is expected to close in the first quarter of 2012.

“The cloud is a core of SAP’s future growth, and the combination of SuccessFactors’ leadership team and technology with SAP will create a cloud powerhouse. The acquisition will help us address the top priority for CEOs globally – managing people and talent,” said Bill McDermott, Co-CEO, SAP.

SuccessFactors is believed to operate the largest scale of paying cloud users with 15 million subscription seats. Currently the company has 3,500+ customers in 168 countries. SuccessFactors recorded 77 per cent revenue growth year-over-year in the third quarter 2011 and 59 percent revenue growth year-over-year in the first nine months of 2011. SuccessFactors is headquartered in San Mateo, California, and has around 1,450 employees.

Bill McDermott (Co-CEO, SAP): The cloud is a core of SAP’s future growth.