2 June 2003 PeopleSoft has agreed to acquire mid-market enterprise applications company JD Edwards for $1.7 billion, creating the world’s second largest business applications company after SAP.
Combined, the companies will have approximately $2.8 billion in annual revenues, 13,000 employees and 11,000 customers across more than 150 countries.
Under the agreement, which is likely to close in the third or fourth quarter of 2003, JD Edwards’ stockholders will own around 25% of the stock in the combined company.
Craig Conway, CEO of PeopleSoft said that the acquisition would give both mid-sized and large enterprises “the broadest suite of integrated enterprise software applications in the world”.
The majority of PeopleSoft’s customers are at the high-end of the market, where spending on enterprise applications has slowed. The acquisition of JD Edwards gives PeopleSoft access to more mid-market customers and, therefore, a new seam of revenue.
JD Edwards has a strong heritage in selling to organisations with revenues between $250 million and $1 billion, and the medium-sized divisions or subsidiaries of multinationals.
According to Conway, one of the greatest advantages of the deal is that there is very little customer overlap. PeopleSoft’s strengths lie in human resources, while JD Edwards’ focus has been on manufacturing and distribution. Conway only identified 16 customers in PeopleSoft’s sales pipeline that were also looking at JD Edwards.
PeopleSoft executives also predicted the deal would reduce the operational costs of the companies by around $80 million in the first year of combined operation.
Both companies have recently emerged from difficult quarters after a sharp decline in spending on enterprise applications, so achieving these savings will be central to the success of the acquisition.