Oracle's Acquisition of Peoplesoft
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Case Details:
Case Code : BSTR154
Case Length : 19
Pages Period : 2000-2005
Organization : ORACLE
Pub Date : 2005
Teaching Note : Not Available
Countries : United States
Industry : Software
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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“The combination of these two companies brings together some of the best
products and people in the enterprise applications market, all for the benefit
of the customer.” 1
- Larry Ellison, Chief Executive Officer, Oracle Corporation.
“After careful consideration, we believe this revised tender offer provides
good value for PeopleSoft stockholders. PeopleSoft is a strong and vibrant
company." 2
- George Battle, Chairman, PeopleSoft's Transaction Committee.
Introduction
On January 07, 2005, Oracle Corporation, the second largest software company in the world, announced that it would acquire PeopleSoft Inc.3 at $10.3 bn.
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The announcement followed a
tender offer in which more than 97 percent of PeopleSoft's shareholders tendered
their stock. Post-merger, Oracle would emerge as the second largest manufacturer
of business application software in the world.
Oracle first made its hostile bid to acquire PeopleSoft on June 06, 2003.
Meanwhile, in July 2003, PeopleSoft acquired JD Edwards.4 Oracle's acquisition of PeopleSoft finally
materialized after an 18-month struggle between the two companies that involved
multiple litigations and bitter exchanges between Oracle's Larry Ellison
(Ellison) and the then PeopleSoft's CEO Craig Conway (Conway).
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The acquisition was unique in many ways. It raised corporate governance issues
when Peoplesoft's shareholders opposed the use of poison pills by the
company's management. It also led to debates regarding the use of poison
pills and whether prevailing regulations required a review. It brought
defeat to the US Department of Justice (DOJ) in an antitrust case, thus
encouraging bigger consolidations in the software industry, in future.
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It was also one of the most widely analyzed acquisitions due to the
hostility involved, its huge scale, multiple litigations, and the deal
price.
Oracle had initially announced that it would discontinue PeopleSoft's
products. Later, the company changed its stand and stated that it would
support the products and would not drop them immediately. Most analysts
expressed doubts on the success of the merger.
However, Ellison was
confident that it would work, “This merger works because we will have
more customers, which increases our ability to invest more in
applications development and support.”5 |
Oracle's Acquisition of Peoplesoft
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