Another Angle on the SAP/Business Objects Merger

So while we've commented a few times (like here, here, and ok, here) on the potential issues behind the impending SAP/Business Objects merger, today on RealMoney.com, writer and investor Vasu Vijayraghavan chimes in with a more financially oriented analysis of the balance sheet fundamentals of both companies, and comes to the conclusion that the deal isn't a great one for SAP shareholders--to the point where she's sold her shares.

Now the Performance Guys are not in the business of touting a specific stock, and we certainly don't pretend to be as educated as the experts in the field. But in contrast to a drive-by "this deal stinks don't do it" type of article, Ms. Vijayraghavan cites some compelling reasons why this isn't good for holders of SAP in her opinion. Some tidbits to support this hypothesis:

#1: Most of the BOBJ current financial metrics are, on the income side, worse than SAP's, with a table full of supporting data contained in article;

#2: Balance sheet and cash position of BOBJ including outstanding liabilities and restricted cash;

#3: Significant increase in total liabilities due to recent acquisitions (up to 38% of total equity from 2% last December, primarily (it would seem) as a result of the Cartesis acquisition, which was the biggest investment the company made this year)

All this, coupled with the decrease in quarterly revenues, has her antennae up. Now Business Objects investors are protected of course, with the offering moving ahead full steam and the stock trading at the offer price.

These facts could be more of any issue, however, when it comes time to derive the "synergies" that SAP investors will be expecting from the acquisition. That's when we'll see if these issues raised are just disparate data points, or precursors to some major restructuring that needs to occur to ensure SAP continues to deliver. To date we've heard nothing from both SAP and Business Objects other than the party line, which is focused on changing very little in the structure of both organizations. However, it will be interesting to see if that stance changes should the underlying financial fundamentals of both companies continue to diverge.