Dusseldorf SAP is significantly expanding its financing business: The software group is acquiring a majority stake in Taulia, a start-up based in San Francisco. With its platform, Taulia offers financial solutions for suppliers and their customers.
SAP published its final figures for the fourth quarter and for the full year 2021 with this news. More precise information on cash flow is new, which according to SAP’s forecast due to investments in 2022 will fall from five to up to 4.5 billion euros.
SAP was also successful in the cloud business: 1,300 customers are already using the core software S/4 Hana via the cloud. “That’s a very good number,” says Holger Schmidt, analyst at Bankhaus Metzler.
However, investors took the weak cash flow and the acquisition with little enthusiasm. The stock fell 7 percent. The weak market environment played a role here, but SAP was by far the biggest loser in the Dax.
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No disclosures were made about the acquisition price or other financial details of the Taulia deal. The start-up has more than two million customers. These include the aviation group Airbus, the car manufacturer Nissan and the pharmaceutical group Astra-Zeneca.
Taulia was valued at $400 million in 2020 funding. According to various sources at SAP, the takeover price should be less than one billion dollars. A large investment for the software group, which had already spent a similar amount of money on the start-up Signavio last year.
The acquisition of 95 percent of the shares in Tulia is expected to be completed by March. It’s a bet on an area that’s come under heavy focus due to the pandemic and supply issues.
Typically, companies only pay their customers two to three months after delivery. With Tulia, suppliers can reduce this to a few days – but they have to pay a fee of up to ten percent for this.
Léo Apotheker mediated
Tulia’s business model offers more security and fewer payment defaults for suppliers. The advantage for the companies that purchase goods or services: they receive part of the fees.
The interim financing also takes a burden off the balance sheet: working capital is released, which increases financial flexibility and cash flow. “The acquisition positions us well to become a leader in working capital management,” said Luka Mucic, CFO of SAP.
Léo Apotheker may have played a central role in the purchase. The former SAP boss is a director at Taulia and holds shares. The bank JP Morgan also owns shares in the start-up. SAP emphasized that it should continue to do so. “SAP will invite additional financial institutions to become shareholders in Taulia,” the company said in a press release.
The idea: The Taulia platform should continue to run independently in order to attract as many banks and their customers as possible. Accordingly, the start-up should be kept on a long leash, and non-SAP customers should also be addressed.
“Free funds are the oxygen that companies need to breathe in difficult economic cycles and growth phases,” Cédric Bru justified the sale. Taulia’s CEO will continue to lead the business. The integration of SAP and Taulia is already large. 80 percent of Taulia customers use the software from SAP.
Free cash flow falls in 2022
Two weeks ago, SAP published the figures for the fourth quarter and for the full year 2021. The Walldorf-based group has now specified its results and cash flow prospects.
Cash flow last year was EUR 6.21 billion, above SAP’s forecast of EUR 6 billion. At five billion euros, free cash flow was also more than ten percent above expectations.
For the current year, however, free cash flow is expected to fall to 4.5 billion euros. Investments in the booming cloud business have an impact here, and more is also being spent on employees.
Overall, sales in the fourth quarter climbed by six percent to almost seven billion euros. Cloud revenues increased significantly more at 28 percent to EUR 2.61 billion. The revenues of the core product S/4 Hana Cloud even increased by 65 percent to 329 million euros.
The software group has exceeded its profit forecast, which was raised several times in the past year. Currency-adjusted operating profit increased by one percent to 8.41 billion euros, SAP announced late Wednesday evening. Most recently, the Walldorf group had increased the range from 8.1 to 8.3 billion euros in October.
More: “From my point of view, SAP should be evaluated completely differently” – Christian Klein is attacking in the cloud business