No Bidding War for Concur as SAP Made the Only Acquisition Offer

There was no behind-the scenes bidding war for the acquisition of Concur as SAP, which plans to acquire Concur for $129 per share, or $8.3 billion, was the sole bidder.

Concur, which provides SaaS travel booking and expense solutions for corporations, details the run-up to the September 18, 2014, acquisition announcement in a Securities and Exchange Commission filing here.

Initial contacts about an SAP strategic transaction with Concur began in March 2012 and ended two months later without reaching the due diligence stage, Concur states.

Two years later, on May 20, 2014, Arlen Shenkmen, SAP’s head of corporate development, contacted Concur CEO Steve Singh and the process, which began with discourse of a non-confidential nature between the two parties, heated up on July 22, 2014, when SAP CEO Bill McDermott phoned Singh “to discuss SAP’s interest in making a proposal regarding an acquisition of Concur,” the company states.

On July 23, SAP made its initial offer of $110 per share in an all-cash deal, and over the course of the next week Concur engaged Qatalyst Partners as its exclusive financial advisor and reached out to three companies other than SAP that Concur felt had the financial resources and possible strategic alignment to be interested in an acquisition.

Concur also contacted and a fourth company, a partner, that it thought might be interested in an acquisition.

None of these four companies made a bid, as did no other company other than SAP even after Bloomberg published a story September 2 indicating that Concur was looking at a sale, and had “approached” SAP and Oracle about a transaction.

In the realm of speculation, IBM, American Express, the Priceline Group and other candidates might have been involved in the feeling out process.

SAP Increased Its Bid — Twice

After Concur told SAP that $110 per share wouldn’t be adequate, SAP on August 6 proposed an all-cash transaction at $120 per share. Concur countered with $135 on August 11, and SAP hiked its offer to $129 on August 19.

The $129 per share deal that Concur accepted September 18 represents a 20% premium over its closing share price a day earlier.

In September, prior to the merger announcement, SAP requested and got agreements that American Express, which wields about a 15% stake in Concur and has a board member, and Singh would vote their shares in favor of the transaction.

Concur telegraphs the fact that there could be potential problems with customers after the still-pending acquisition is complete as it stated during the period when it was negotiating with SAP and contacting other potential buyers that it was concerned that if word leaked out about the acquisition then Concur could face adverse consequences.

Here’s how Concur described the Background to the Merger:

Our Board periodically reviews and assesses our long-term strategies and objectives and developments in the markets in which it operates, including, among other things, strategies to improve our business and operations through potential partnering, strategic alliances or other strategic opportunities with other companies. In addition, our senior management has met from time to time with representatives of other companies to discuss trends in their respective businesses and explore opportunities for strategic transactions.

In March 2012, SAP contacted us regarding exploring a potential business combination. The parties entered into a mutual non-disclosure agreement in April 2012, and held preliminary discussions regarding a strategic transaction. In connection with these discussions, our Board engaged Qatalyst Partners LP (“Qatalyst Partners”) as its financial advisor, and held multiple meetings in April and May 2012 to consider a potential strategic transaction with SAP. The discussions between the parties did not advance to the due diligence or definitive agreement stage and were mutually discontinued in May 2012.
On May 20, 2014, Arlen Shenkman, senior vice president and head of corporate development of SAP, contacted S. Steven Singh, the chairman of our Board and our chief executive officer, to request that we provide SAP with a non-confidential update on our business.

On May 28, 2014, Mr. Singh, John Torrey, our executive vice president, corporate strategy, Mr. Shenkman and other SAP personnel met in Palo Alto, California, to discuss publicly-available information regarding our business.

On June 13, 2014, Mr. Shenkman contacted Mr. Singh to inform him that SAP was not prepared to move forward with further discussions in the near-term.

On July 19, 2014, Mr. Shenkman contacted Mr. Singh to inquire whether Mr. Singh would be amenable to receiving a call from Bill McDermott, the chief executive officer of SAP SE, regarding SAP’s interest in a potential strategic transaction between the companies.
On July 22, 2014, SAP sent to us a proposed amendment to reinstate the mutual non-disclosure agreement the parties had entered into in 2012. SAP’s counsel, Jones Day, and Concur’s counsel, Fenwick & West LLP (“Fenwick & West”), negotiated the terms of the proposed amendment and on July 23, 2014, SAP SE and Concur executed the amendment to the mutual non-disclosure agreement.

On July 22, 2014, Mr. McDermott called Mr. Singh to discuss SAP’s interest in making a proposal regarding an acquisition of Concur.

On July 23, 2014, Mr. Shenkman called Mr. Torrey to inform him that SAP would be providing to us a preliminary indication of interest regarding an acquisition of Concur. Later that day, SAP delivered to us a written non-binding preliminary indication of interest proposing an all-cash acquisition of Concur at a price of $110.00 per share. The indication of interest stated that SAP’s proposed transaction would not be subject to any financing contingency. The indication of interest also stated that in order for SAP to proceed with the due diligence and negotiation of a transaction, SAP would require that we enter into a 30-day exclusivity period, and attached a proposed exclusivity agreement.

On July 24, 2014, Mr. Torrey contacted Mr. Shenkman to inform him that we had received SAP’s preliminary indication of interest and that our Board would give the proposal due consideration.

On July 24 and 25, 2014, in the interest of maximizing the opportunity for another party with the likely financial ability and potential strategic interest in making an acquisition proposal to us to have the time to do so, Mr. Singh conferred with each other member of our Board as well as representatives of Qatalyst Partners regarding soliciting other parties that would likely have the financial ability and potential strategic interest in acquiring Concur. Each member of our Board agreed that the only parties that would likely have the financial ability and potential strategic interest in making an acquisition proposal to us were three companies that we refer to as Strategic Party A, Strategic Party B and Strategic Party C.

On July 25, 2014, we entered into an agreement to engage Qatalyst Partners as its exclusive financial advisor with respect to a potential change of control transaction.

On July 25, 2014, Mr. Singh contacted the chief executive officer of Strategic Party A, stating that we had received an acquisition proposal that we were considering and inquired whether Strategic Party A would be interested in potentially making an acquisition proposal to Concur. The chief executive officer of Strategic Party A stated that it would consider potentially making an acquisition proposal and would respond further in a few days.

Also on July 25, at Mr. Singh’s direction, representatives of Qatalyst Partners contacted the chief executive officer of Strategic Party B and a senior corporate development executive of Strategic Party C stating that we had received an acquisition proposal that we were considering and inquired whether Strategic Party B and Strategic Party C, respectively, would be interested in potentially making an acquisition proposal for Concur. The chief executive officer of Strategic Party B stated that he would give further consideration to whether Strategic Party B would be potentially interested in making an acquisition proposal and would respond further in a few days. The senior business development executive of Strategic Party C stated that he would discuss with other executives at Strategic Party C whether it would be potentially interested in making an acquisition proposal and would respond further in a few days.

On July 26, 2014, a senior corporate development executive at Strategic Party A contacted Mr. Torrey to request additional information regarding Concur, which Mr. Torrey provided on July 27, 2014.

On July 27, 2014, our Board held a meeting, with representatives of Qatalyst Partners and Fenwick & West participating. Mr. Singh reviewed with our Board the recent contacts with SAP and SAP’s July 23 proposal as well as the initial contacts with Strategic Party A, Strategic Party B and Strategic Party C. The representatives of Fenwick & West reviewed with our Board its fiduciary duties in the context of considering a potential acquisition transaction. Our Board discussed with our management our business prospects on a stand-alone basis.

The representatives of Qatalyst Partners discussed with our Board the financial aspects of SAP’s proposal of $110.00 per share. Our Board determined that SAP’s proposal of $110.00 per share represented insufficient value and instructed our management and Qatalyst Partners to convey this to SAP. Our Board also further considered the parties that would likely have the financial ability and potential strategic interest in making an acquisition proposal to us, and determined that only Strategic Party A, Strategic Party B and Strategic Party C were likely to have the financial ability and potential strategic interest in acquiring Concur, and that contacting additional parties that would be less likely to have such a financial ability and strategic interest would increase the risk of a public disclosure regarding our consideration of a potential acquisition transaction, resulting in potentially significant adverse effects on our business. Our Board also ratified the engagement of Qatalyst Partners as its exclusive financial advisor with respect to a potential change in control transaction.

Also on July 27, 2014, Mr. Torrey and a representative of Qatalyst Partners spoke with a senior corporate development executive of Strategic Party A regarding Concur and the process regarding consideration of a potential acquisition transaction.

Also on July 27, 2014, pursuant to an existing contract between Concur and a company (whom we refer to as Strategic Party D), we provided written notice to Strategic Party D that we expected to engage in discussions regarding a potential acquisition transaction and that such company was invited to participate as a bidder in such process. Later on July 27, Strategic Party D confirmed to Mr. Singh that it did not wish to participate further in the process regarding a potential acquisition transaction.

On July 28, 2014, representatives of Qatalyst Partners discussed with Mr. Shenkman and Deutsche Bank, SAP’s financial advisor, that our Board had determined that SAP’s $110.00 proposal did not represent sufficient value. The representatives of SAP requested that we provide additional financial information so that SAP could consider whether to increase its proposal.

On July 29, 2014, Mr. Torrey and Mr. Shenkman met in San Francisco to discuss Concur’s business strategy and additional financial information.

On July 30, 2014, Strategic Party A informed us that it was not interested in pursuing a potential acquisition transaction at such time.

On July 31, 2014, Mr. Singh and Mr. McDermott met in New York and discussed the business strategies of their companies and the potential business combination. Mr. Singh and Mr. McDermott also discussed SAP potentially increasing the transaction price but no proposals were made.

Also on July 31, 2014, Mr. Torrey, Mr. Shenkman and representatives of Qatalyst Partners and Deutsche Bank met in San Francisco to further discuss a potential transaction.
On August 1, 2014, the chief executive officer of Strategic Party B contacted a representative of Qatalyst Partners and stated that while a potential acquisition of Concur was not a strategic priority for Strategic Party B, that he would be interested in meeting with Mr. Singh to better understand our business.

On August 3, 2014, our Board held a meeting, at which our Board discussed the recent communications with SAP and the other parties contacted.

On August 4, 2014, we announced its financial results for the third quarter of its 2014 fiscal year.

On August 5, 2014, representatives of Qatalyst Partners and Deutsche Bank discussed transaction valuation.

Also on August 5, 2014, Strategic Party C informed representatives of Qatalyst Partners that Strategic Party C was not interested in pursuing a potential acquisition transaction at such time.

On August 6, 2014, Mr. Shenkman and Mr. Torrey discussed our financial results and business and further discussed transaction valuation.

Later on August 6, 2014, SAP delivered to us a written non-binding preliminary indication of interest proposing an all-cash acquisition of Concur at a price of $120.00 per share. The indication of interest stated that SAP’s proposed transaction would not be subject to any financing contingency. The indication of interest also stated that in order for SAP to proceed with the due diligence and negotiation of a transaction, SAP would require that we enter into a 30-day exclusivity period, and attached a proposed exclusivity agreement.
In the days following August 6, 2014, Mr. Singh conferred with other members of our Board regarding SAP’s increased proposal.

On August 7, 2014, Mr. Singh and the chief executive officer of Strategic Party B met and further discussed their companies’ business strategies. The chief executive officer of Strategic Party B stated that it was not likely that Strategic Party B would be interested in pursuing a potential acquisition of Concur, and that he would contact Mr. Singh within a few days with a decision.

On August 10, 2014, our Board held a meeting, with representatives of Qatalyst Partners and Fenwick & West participating. The representatives of Qatalyst Partners discussed with our Board the financial aspects of SAP’s proposal of $120.00 per share. Our Board discussed with our management our business prospects on a stand-alone basis. Our Board discussed the recent communications with the other parties contacted regarding a potential acquisition transaction. The representatives of Fenwick & West further reviewed with the Board its fiduciary duties in the context of considering a potential acquisition transaction. Our Board determined that SAP’s proposal of $120.00 per share represented insufficient value and instructed our management and Qatalyst Partners to convey this to SAP.

On August 11, 2014, Mr. Torrey and Mr. Shenkman met in Newtown Square, Pennsylvania to further discuss transaction valuation. During this discussion, Mr. Torrey informed Mr. Shenkman that SAP’s offer would need to be substantially higher in order for the transaction to be supported by our Board, and that a price of $135.00 per share might be supported by our Board.

On August 12, 2014, Mr. Singh and Mr. McDermott met in Philadelphia, Pennsylvania to further discuss the strategic opportunity presented by a potential business combination and transaction valuation. During this discussion, Mr. Singh informed Mr. McDermott that SAP’s offer would need to be substantially higher in order for the transaction to be supported by our Board.

On August 13, 2014, representatives of Qatalyst Partners and representatives of Deutsche Bank further discussed transaction valuation.

On August 14, 2014, the chief executive officer of Strategic Party B contacted Mr. Singh to inform him that Strategic Party B was not interested in pursuing a potential acquisition transaction at such time.

On August 14, 2014, Mr. Shenkman contacted Mr. Torrey to request additional financial information regarding Concur, which Mr. Torrey provided on August 15, 2014.
On August 19, 2014, Mr. Shenkman and Mr. Torrey further discussed transaction valuation. During this discussion, Mr. Shenkman stated that SAP was prepared to increase its offer.

Later on August 19, 2014, Mr. Singh and Mr. McDermott further discussed transaction valuation. During this discussion, Mr. McDermott stated that SAP would, as a final offer, increase its proposal to $129.00 per share, and that SAP would require that we enter into a 30-day exclusivity period in order for SAP to proceed with due diligence and the negotiation of a definitive transaction agreement.

On August 20, 2014, SAP delivered to us a written non-binding preliminary indication of interest proposing an all-cash acquisition of Concur at a price of $129.00 per share. The indication of interest stated that SAP’s proposed transaction would not be subject to any financing contingency. The indication of interest also stated that in order for SAP to proceed with the due diligence and negotiation of a transaction, SAP would require that we enter into a 30-day exclusivity period, and attached a draft exclusivity agreement.
On August 21, 2014, we sent to SAP our proposed revisions to the exclusivity agreement proposed by SAP. On August 21 and 22, 2014, Concur, SAP and their respective counsel at Jones Day and Fenwick & West negotiated the terms of the exclusivity agreement.

On August 23, 2014, our Board held a meeting, with representatives of Qatalyst Partners and Fenwick & West participating. The representatives of Qatalyst Partners discussed with our Board the financial aspects of SAP’s proposal of $129.00 per share. The representatives of Fenwick & West reviewed with our Board the proposed transaction timetable and SAP’s requirement that we enter into a period of exclusivity to conduct due diligence and for the parties to negotiate a definitive agreement. Our Board discussed with our management our business prospects on a stand-alone basis. Our Board discussed the recent communications with the other parties contacted regarding a potential acquisition transaction. Our Board determined to grant SAP a period of exclusivity for SAP to conduct due diligence and for the parties to try to negotiate a definitive agreement providing for a transaction in which our stockholders would receive $129.00 per share.

Later on August 23, 2014, Concur and SAP and their counsel further negotiated the terms of the exclusivity agreement, following which Concur and SAP SE entered into the agreement, providing for an exclusivity period expiring on September 21, 2014.

Commencing on August 25, 2014, representatives and advisors for SAP were granted access to an online data room for purposes of SAP’s due diligence review of Concur in connection with the proposed transaction. During the period from August 25, 2014 to September 17, 2014, representatives of SAP and its legal and financial advisors engaged with Concur and its legal and financial advisors for the purpose of extensive confirmatory due diligence activities.

On August 29, 2014, Jones Day and Paul, Weiss, Rifkind, Wharton and Garrison LLP (“Paul, Weiss”), legal counsel to SAP, provided a draft of the Merger Agreement to Fenwick & West, reflecting proposed definitive terms of the transaction, including a proposed termination fee of 4.5% of the enterprise value of Concur in the transaction, and a draft voting agreement to be entered into by certain of our stockholders.

On September 2, 2014, Fenwick & West provided to Jones Day and Paul, Weiss proposed revisions to the draft Merger Agreement, including among other terms, a proposed termination fee 1.0% of the enterprise value of Concur in the transaction.

On September 2, 2014, following the close of regular trading on The NASDAQ Global Select Market, Bloomberg, a major news outlet, reported that we were exploring a potential sale of the company. On September 3, 2014, our stock price closed at $109.60, an increase of 8.6% over the closing price on September 2, 2014.

On September 3, 2014, Concur and SAP, with their respective financial and legal advisors, held a series of due diligence meetings at Fenwick & West’s offices in Seattle, Washington.

On September 4, 2014, Concur and SAP SE executed an addendum to the mutual non-disclosure agreement between them to provide for restricted access and process controls with respect to the review of competitively-sensitive information in the due diligence process.

From September 5, 2014 through September 18, 2014, representatives of Concur and SAP and their respective financial and legal advisors engaged in negotiations concerning the proposed terms of the definitive agreements for the proposed transaction. SAP requested that American Express Travel Related Services Company, Inc. (“American Express”), a significant Concur stockholder with a designee on our Board, as well as Mr. Singh, enter into a voting agreement in support of the merger. During this period, our representatives and representatives of American Express engaged in negotiations with SAP’s legal advisors regarding the terms of the voting agreement.

On September 7, 2014, our Board held a meeting, with representatives from Qatalyst Partners and Fenwick & West participating, to discuss the potential transaction, including the material terms proposed in the Merger Agreement and key open issues under negotiation between the parties. Our Board discussed, among other issues, the need to permit our Board to be able to respond to and negotiate any unsolicited potentially superior proposals, and terminate the Merger Agreement to accept a superior proposal that is not matched by SAP upon the payment of a reasonable termination fee to SAP. The representatives of Qatalyst Partners reviewed with our Board SAP’s plans for financing the purchase price to be paid in the transaction.

Between September 8 and 14, 2014, SAP and its advisors continued their due diligence of Concur, and the parties and their legal counsel continued to negotiate the terms of the definitive agreements for the transaction.

On September 14, 2014, our Board held a meeting, with representatives from Qatalyst Partners and Fenwick & West participating, to discuss the potential transaction. Representatives of Fenwick & West reviewed in detail the material terms and conditions of the Merger Agreement and the proposed transaction, including the process for us to respond to unsolicited acquisition proposals and superior proposals as well as the amount of the termination fee and the circumstances under which it would be payable, as well as other terms then under negotiation. Our Board discussed with our management our business prospects on a stand-alone basis. The representatives of Qatalyst Partners discussed with our Board the financial aspects of SAP’s proposal of $129.00 per share to be paid in the merger.

Between September 14 and 18, 2014 the parties and their legal counsel continued to negotiate the terms of the definitive agreements for the transaction.

On September 15, 2014, Mr. Singh met with Hasso Plattner, the chairman of the supervisory board of SAP, and Mr. McDermott to discuss the potential business combination of Concur and SAP.

On September 17, 2014, following further discussions between their respective advisors, Concur and SAP agreed on a termination fee of $265 million, or approximately 3.2% of the enterprise value of Concur in the transaction.

On September 18, 2014, legal counsel for Concur and SAP completed their negotiations of the Merger Agreement and related documents.

Later on September 18, 2014, our Board held a meeting, with representatives from Qatalyst Partners and Fenwick & West participating, to consider approval of the potential transaction. Representatives of Fenwick & West reviewed the results of the final negotiations regarding the transaction terms, including the termination fee of $265 million, or approximately 3.2% of Concur’s enterprise value in the transaction.

Representatives of Qatalyst Partners reviewed with our Board their financial analysis of the $129.00 per share cash consideration to be received by holders of shares of Concur common stock pursuant to the Merger Agreement, and delivered to our Board an oral opinion, confirmed by delivery of a written opinion dated September 18, 2014, to the effect that, as of that date and based on and subject to the considerations, limitations, qualifications and other matters set forth in the written opinion, the $129.00 per share cash consideration to be received by holders of shares of Concur common stock (other than SAP or any of its affiliates) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders.

The full text of the written opinion of Qatalyst Partners, dated September 18, 2014, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken in connection with, such opinion, is attached as Annex B to this proxy statement. See also “—Opinion of Concur’s Financial Advisor.”

Following consideration of the proposed terms of the Merger Agreement, further discussions with management and its legal and financial advisors, and the factors described under “—Recommendation of Concur’s Board and Reasons for the Merger,” our Board unanimously adopted resolutions that determined and declared that the transactions contemplated by the Merger Agreement, including the merger, were advisable and fair to, and in the best interests of, Concur and its stockholders, approved and declared advisable the Merger Agreement, the merger and the other transactions contemplated thereby, authorized Concur to execute, deliver and perform the Merger Agreement and recommended that our stockholders adopt the Merger Agreement.

On September 18, 2014, the supervisory board of SAP SE approved the acquisition of Concur pursuant to the Merger Agreement.

Concur, SAP and Merger Sub then executed the Merger Agreement and the parties to the voting agreements executed the voting agreements.

Immediately following the execution of the Merger Agreement, Concur and SAP issued a joint press release announcing the signing of the Merger Agreement.