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Free Example of PeopleSoft vs. Oracle Essay

The Enterprise Resource Planning (ERP) is software that enabled business customers to integrate all data processing in a company across functions. One of the major developers of ERP included SAP, Siebel and J.D Edwards who PeopleSoft entered an agreement to merge with at a price of $1.8 Billion. This would work for both their good because not only did their products fit in together but also because they combined market share would be 15% which would exceed Oracle’s 13%. Oracle had anticipated this acquisition and had a plan of its own. After PeopleSoft announced the acquisition of J.D Edwards, Oracle made an attempt to raid the company unsuccessful.

The raid was unsuccessful because of a couple of things. Whereas a serious raider normally offers a premium of 20% or more, Oracle offered each share at $16, this represented 6% premium over the current price of the stock at PeopleSoft. This was made worse when Oracle said they would not offer PeopleSoft’s software products to their customers; on the contrary, they only sought to turn PeopleSoft’s clients into those of its own E-Business suit. This did not sound serious at all and was disrespectful; despite Oracle getting to become the second ERP provider – after SAP – it showed that Oracle was not even a tad bit interested with either PeopleSoft’s employees or its software products. PeopleSoft’s CEO, Craig Conway, did not appreciate the takeover bid and thought of it as a ploy by Oracle to prevent PeopleSoft’s acquisition of J.D Edwards and also an attempt to damage its business. PeopleSoft’s deal of acquiring J.D depended on ability of the former to maintain its stock price which was dependent on the trade stock; Oracle’s proposal would ensure that PeopleSoft’s trade stock took a dip. This meant that even without buying PeopleSoft’s stock, their customers would be hesitant to buy their products since its future was at stake. This is why the takeover was rejected.

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According to Conoway, there was no condition that would make the sale of PeopleSoft to Oracle to be considered, but according to the committee of the independent board of directors, there were conditions that would – with the shareholder’s interest at heart – make it possible to sell. The first of those conditions was price, $16 per share was not logical and a rival company would make a better offer, this was expressed and Oracle increased their bid by 22% which was $19.5 and 29% premium. The second condition was to consider the intentions of Oracle’s bid to PeopleSoft. Larry Ellison had to prove that Oracle’s intention in their offer was not to harm PeopleSoft and derail the J. D. Edwards acquisition. The third factor was getting to know what would happen to PeopleSoft’s customers once it was sold. There had to be a Customer Assurance Plan (CAP) which would repay the customers two to five times the price of the software should it fail to provide adequate service in its lifespan.

The big question that had to be answered was whether to continue with the J.D acquisition and to accept Oracle’s offer. To protect itself from a hostile takeover, PeopleSoft had come up with a ‘poison pill’. The poison pill required that in the event of an acquirer buying 20% of the company’s shares, new shares would be offered to the shareholders at a low price. This would ensure reduction of the raider’s share percentage below the 20% mark. Although the takeover of the company via stock acquisition without the approval of the board of directors was impossible, hostile raiders could still take their chances and elect their own board members.

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