How SuccessFactors Signaled It Was on the Block
Lots of us were surprised by the weekend deal in which software giant SAP took over the cloud-based human resources software concern SuccessFactors for $3.4 billion. But had you been paying close attention to SuccessFactors’ SEC filings, you might have seen something coming.
It turns out there were some subtle signals that the company was on the block. Theo Francis of Footnoted, the Morningstar-owned blog that follows the nitty-gritty details of SEC filings, notes a classic sign of a pending deal — increases in executive compensation and an apparent preoccupation with change-of-control provisions.
Senior executives often work these provisions into their compensation deals to ensure they don’t leave any money on the table or lose their equity in case a company is sold, merged or acquired. Often any unvested equity or options vest fully.
Francis notes that in July 2010, SucccessFactors added change-of-control provisions to its compensation plans without ever having given a thought to the subject before. Also, severance provisions were revised. For example: CEO Lars Dalgaard’s contract grants him double his annual salary and a target bonus should he lose his job after an acquisition. This comes on top of a $90,000 boost in his annual base salary to $540,000, plus an annual bonus that maxes out at twice that and a pot of restricted stock awards, worth about $6 million, all of which vest in the event of a deal.
All told, Dalgaard could walk away with almost $17 million when the deal closes. You can read more about all this in the original April 22 filing here.