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Oracle Hostile Takeover of PeopleSoft (A)

Oracle was serious about acquiring PeopleSoft to gain market share as the top ERP vendor and expand its product offerings. However, the acquisition may also have been intended to prevent a merger between PeopleSoft and J.D. Edwards and scare away PeopleSoft's customers. The Customer Assurance Plan that PeopleSoft proposed is not in the best interest of shareholders as it would eat into profits and increase risks without changing returns. Additionally, the CAP may not hold up in court as it could be seen as an unnecessary "poison bill" based on precedent.

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55 views5 pages

Oracle Hostile Takeover of PeopleSoft (A)

Oracle was serious about acquiring PeopleSoft to gain market share as the top ERP vendor and expand its product offerings. However, the acquisition may also have been intended to prevent a merger between PeopleSoft and J.D. Edwards and scare away PeopleSoft's customers. The Customer Assurance Plan that PeopleSoft proposed is not in the best interest of shareholders as it would eat into profits and increase risks without changing returns. Additionally, the CAP may not hold up in court as it could be seen as an unnecessary "poison bill" based on precedent.

Uploaded by

vikas joshi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Oracle’s hostile

takeover of
Peoplesoft(A)
Case Analysis
Mouazzam Jawed
EPGP-13B-057
1. Was Oracle serious about its bid?
I think Oracle was serious about the move to takeover PeopleSoft because of following reason:
• Oracle understood that there was consolidation happening in ERP software market. In order to gain larger market
share and cement its position as top vendor, they needed to acquire large firm like PeopleSoft.
• The future merger would also expand Oracle’s offerings. They will have some of the core capabilities of PeopleSoft’s
well developed applications in their portfolio
• Case also mentions that Ellison wanted to create a vertically integrated firm. This acquisition goes well with the
vision of the CEO
• Once Oracle acquires PeopleSoft it essentially kills the competition in the market increasing revenue and profit.

Though, it seems that Oracle was actually serious about the bid, it also should be noted that there was nothing to lose.
• Oracle might have wanted to put-off possible merger of PeopleSoft and J D Edwards
• Scare away PeopleSoft’s customer: shady sales tactics
2. Is the CAP in the interest of shareholders
I think CAP – Customer Assurance Plan is not in the interest of shareholders:
• In case company is unable to provide services to existing customers they will have to pay the agreed CAP amount
thus eating away earnings – dividend that could have been paid to shareholders.
• It increases the risk of shareholder while return remains same. In case company goes bankrupt and is unable to
operate and liquidated, shareholder will not get anything and most of the money will go CAP.
• Shareholder value will eventually go down.
3. What is the legal tenability of CAP?
I don’t see legal tenability of CAP. If it goes to court, it may be decided in favour of Oracle as CAP is a “poision bill”
and unnecessary. There are various example for the same.
https://www.nytimes.com/2004/10/04/business/technology/technology-long-battle-between-oracle-and-peoplesoft.html

There was a similar case in case of takeover of Mesa Petro by Unocal. Court ordered in favour of Unocal.
It should also be noted that post acquisition Oracle would have the majority and they can easily write it over with the
help of new board.
Thank You
Mouazzam Jawed

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