Oracle Pays Big Premium for NetSuite and Larry Ellison Benefits
February 6, 2017
The article on Reuters titled Oracle-NetSuite Deal May Be Sweetest for Ellison emphasizes the perks of being an executive chairman like Larry Ellison, of Oracle. Ellison ranks as the third richest person in America and fifth in the world. The article suggests that his fortune of over $50B is often considered as mingling with Oracle’s $160B in a way that makes, if no one else, at least Reuters, very uncomfortable. The article does offer some context to the most recent acquisition of NetSuite, for which Oracle paid a 44% premium on a company of which Ellison owns a 45% stake.
NetSuite was founded by an ex-Oracle employee, bankrolled by Ellison. While Oracle concentrated on selling enterprise software to giant corporations, the upstart focused on servicing small and medium-sized companies using the cloud. The two companies’ businesses have increasingly overlapped as larger customers have become comfortable using web-based software.
As a result, it makes strategic sense to combine the two firms. And the process seems to have been handled right, with a committee of independent Oracle directors calling the shots.
The article also points out that such high surcharges aren’t all that unusual. Salesforce.com recently paid a 56% premium for Demandware. But in this case, things are complicated by Ellison’s potential conflict of interest. If Oracle had done more to invest in cloud business or NetSuite earlier, say four or five years ago, they would not find themselves forking over just under $10B now.
Chelsea Kerwin, February 6, 2017
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