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How to spot a merger

By
Dan Primack
Dan Primack
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By
Dan Primack
Dan Primack
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December 7, 2011, 8:39 PM ET
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Want to learn if a public company is seeking to be acquired? Check out recent changes to its senior executive compensation.

That’s the lesson from this week’s news that SAP AG (SAP) will acquire SuccessFactors (SFSF), a provider of cloud-based human capital management solutions, for $3.4 billion.

Back on august 12, the folks at Footnoted sent its professional subscribers an alert that SuccessFactors “may be contemplating a deal” — even though the company had made no such public pronouncements. Footnoted’s hunch wasn’t based on the red-hot M&A market for enterprise software, or because SAP typically seemed overdue for a multi-billion acquisition (although both were true). Instead, it was because SuccessFactors had made several changes to executive compensation in the case of an acquisition.

For example, in July of 2010 SuccessFactors “adopted a new change-in-control severance plan for top executives. For example, chief financial officer Bruce Felt would have all of his equity vest immediately were he to be terminated after an acquisition, as opposed to only half of his equity vesting under a prior agreement. CEO Lars Dalgaard also saw a substantial bump to his vesting schedule in case of a deal, as part of a new contract. Going even further back, Footnoted finds a “generous equity acceleration” granted in May 2010 to a vice president.

None of this, of course, guarantees an acquisition is imminent. But it’s a pretty good hint that the company is at least open to the possibility…


Sign up for my daily email newsletter on deals and deal-makers: GetTermSheet.com

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By Dan Primack
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