If Your Business Travel Isn’t Managed Yet, It Probably Will BeBy
The cost savings from keeping a close eye on employees’ business trips can be enormous—a $19 martini?—yet expense controls are still largely absent from many companies around the world, not to mention government travel.
When considering the potential savings, it’s pretty clear why SAP offered $7.4 billion, or $129 per share, for Concur Technologies, one of the largest travel and expense management firms, in a deal announced on Thursday.
As Bloomberg News reported on Sept. 3, Concur was seeking a buyer and had approached several large players in enterprise technology, including Microsoft and Oracle. About 23,000 companies, such as Chevron, Google, Skype, and the New York Yankees, rely on Concur’s software to track travel and business expenses for roughly 25 million employees. American Express owns 13.5 percent of Concur.
The acquisition will help SAP expand its cloud services and transactions capabilities. Merged with its existing corporate systems, SAP software will conduct about $600 billion in annual transactions, an amount its executives say is larger than that of Amazon.com, EBay, and Alibaba Group combined. Concur also promotes a new product called TripLink that allows employers to track spending at airlines and hotels that are not on a list of preferred vendors. United Airlines, Starwood Hotels & Resorts, InterContinental Hotels Group, Airbnb, and Uber will connect with TripLink, Concur says.
On a Thursday conference call, SAP Chief Executive Officer Bill McDermott called Concur “the best, most marquee asset in the industry.” About 7,000 existing SAP clients already use Concur software, and SAP plans to seek further sales across its broader customer base.
What’s less clear is why the industry’s “marquee asset” decided to put itself up for sale, just as it confronts a variety of potentially lucrative opportunities. Concur’s CEO and co-founder, Steve Singh, avoided that question when a Nomura Securities analyst posed it during yesterday’s call; a Concur spokeswoman did not respond to a request for comment. One reason could be the necessary investments to keep growing so rapidly. Concur’s sales have been robust, but the money needed to “evangelize” the field’s worth to companies has also put a dent in its profits, Richard Baldry of Roth Capital Partners said in a client note on Friday.
Since 2010, Concur’s operating margins have declined from 23 percent to “barely 10 percent” now, says Jack Andrews, an analyst with D.A. Davidson. Concur is spending heavily to expand, with plans to grow into Japan and India, and it’s competing for a large travel management deal with the Pentagon. The company also recently landed a $1.4 billion contract with the General Services Administration to oversee travel and expenses for several federal agencies. Concur lost money in the most recent quarter, given the investments.
In his note, Baldry called the sale premature. Concur management may have decided there was no near-term “payback” from the investments and wanted to grow away from the public market, Andrews says. Shares of Bellevue (Wash.)-based Concur rose 18 percent in afternoon trading. Prior to news the company was seeking a sale, the stock had been little changed this year.
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