When will Oracle buy OB10?
Posted on: May 28, 2012
The developments in the past week have begged many questions. Various parties have different views on whether the SAP purchase of Ariba is a ‘good’ thing or a ‘bad’ thing.
One question has been ‘how do you think OB10 (Ariba’s main competitor in e-invoicing) will react?’.
OB10 was founded in 2000 and has had in excess of $50 million invested in the company through various rounds of funding.
Why is this important?
With rounds of funding, come a pool of investors who will want to realise a high return on their investment at the earliest point.
The news of SAP buying Ariba for $4.3 billion (looking to close the deal third quarter this year) will have inevitably excited investors in networks like OB10 and Tradeshift.
The excitement comes from the multiple applied by SAP to the buy-price. Ariba’s revenues are $444 million, so the deal comes in at ten times revenue.
If this is applied to OB10, the company could be valued at north of $350 million.
This would bring a smile to shareholders’ faces.
There are a few considerations however that could take the edges off those smiles.
- Firstly, Ariba has wider functionality than OB10, handling 17 purchase to pay transactions.
- Secondly, Ariba has a SaaS solution which seemed to really prick SAP’s interest.
- Thirdly, Ariba has around 800,000 companies connected to its network. OB10 has around 120,000.
So although shareholders might take serious encouragement from this M&A development, the excitement drops a little when you compare the size and functionality-reach of the two solutions.
This aside though, one question keeps coming back. What is Oracle doing in this space?
With Crossgate and Ariba in the SAP tool bag, Oracle’s equivalent offering in the purchase to pay space is seemingly looking a little meagre.
It’s been confirmed that Ariba will be sold to Oracle accounts and not exclusively SAP accounts. So what is Oracle doing to have its share of the purchase to pay market?
One question I have been asking myself all last week and heard it from a thought leader in this space at the weekend, it “when will Oracle buy OB10?”.
Whoever Oracle buys, be it Tradeshift or OB10, one thing is clear: Oracle shouldn’t be late to this party. A slow start here could put Oracle on the back foot in what is becoming a huge and lucrative market.
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4 Responses to "When will Oracle buy OB10?"
I’ll respond here in part because I’m currently involved in some unrelated transactions to the parties mentioned here and can hopefully answer Luke’s retort with some intelligence — hopefully two-way meaning intended 🙂
Apologies if this is my second comment (the first I think was lost in WP password approval).
Now, five quick thoughts:
1) Yes, this speculation is on people’s minds. When I saw Suzie yesterday during her trip to Chicago, we brought this up together, so Luke, there’s two of us in sector who think this talk is worth sharing
2) Oracle should buy OB10 … but should buy Transcepta first — another story entirely. For OB10, I would wait until the frothy multiples come back down to earth as Oracle needs basic supplier enablement capability and on-boarding in-house first before volume over a network and broader network connectivity
3) Any CEO who understands fiduciary responsibility to an independent board MUST evaluate offers at these current levels (Luke, I know you would agree with this). Historically, they are off the charts for SaaS/platform/connectivity
4) Deals are being accelerated at the moment (in the past week) owing to SAP’s take out of Ariba; I can attest to this in a number of situations I’m close to
5) OB10 is one of the last remaining supplier e-invoicing network targets with material revenue and volume. The CEO is also a great guy (although he should cut Suzie some slack 🙂 I know he also knows that being a desirable asset should not at all impact customer decisions — new or renewals.
As for everyone else on the transactions side of the house: get some rest this weekend. It’s going to be a hot, long summer.
One last comment … Oracle would need an act of the Corp Dev G-Ds to do either deal. OB10 or Transcepta are both too small for anyone to get excited about internally at Oracle. The only reasons Oracle would ever do such a deal is because it went all the way up. Even though OB10 is larger than Transcepta, the two providers’ revenue together is less than one of Larry’s yachts — the typical point at which something gets interesting for them. So don’t think these two deals will happen just because from a solution architecture and strategy standpoint, they would make sense for Oracle. OB10 would need to be 3.5X-5.5X its current size to be on the regular Oracle deal radar — and Transcepta 10X-13X its current size. That’s probably a good thing … earlier today, I saw someone in Chicago with a t-shirt with a picture of the Death Start that read “I had friends on that ship”. Enough from me … happy summer, everyone.
@Jasondbusch best comments ever 🙂
btw. everybody is missing one important factor, it’s not about the network, but the network as a platform, Ariba had that vision to some extend, OB10 is nowhere near that, neither is Trancepta and Tradeshift well we aren’t for sale 😉
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1 | Luke McKeever
May 28, 2012 at 5:28 PM
I’m not sure that this kind of speculation is really on people’s minds, is it?
OB10 (which has always been 100% SaaS) is at the most exciting point in its 12-year history.
Not only have we continued to win household name after household name across the globe over the past year at the expense of our competition, but working alongside a leading international credit organisation, we are also launching our supply chain finance solution, which will offer suppliers the opportunity to get paid early on their approved invoices. We are incredibly excited about the value that this will provide to both our supplier and buyer e-Invoicing customers.
For the record, our footprint has never been as broad as Ariba’s and we have never intended it to be. OB10 is a best-of-breed e-Invoicing service provider, not an end-to-end P2P vendor. Our customers select us for our unparalleled and dedicated global e-Invoicing expertise.
We are proud of our heritage, excited about the present and do not want speculation like this to impact on our profitable, independent future.