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From an individual point of view, the largely publicized dispute between People soft and Oracle; companies in the business of developing and installing software for business entities, which took centre stage in 2003 still triggers varied reactions from major players in the enterprise resource planning industry.
A highly emotive debate has been evoked among academic and technical circles to try and put the tale of Oracle’s move to acquire People soft into perspective. Oracle on its part had considered to acquire people soft a year before it came up with the widely disputed antic of taking over the company, a move largely viewed by critics as being malicious and of bad intent.
The board at People soft took a rigid stand against Oracle’s intension to acquire the company it had come up with an insulting and rather unusual bid of $ 16 which represented a mere six percent premium. This preposition was quite unacceptable since the norm in serious bidding activities held the threshold at a whopping twenty percent or more.
The company’s chief executive Craig Conway supposedly sensed bad faith on Oracle’s part which also played a major role in the company’s unanimous decision to reject the deal since it viewed the move as a ploy to prevent them from taking over another major player by the name J.D. Edwards. The move would also destabilize their stake at the stock market.
The bid brought to light by Oracle Company also came out to be a unique one with respect to the fact that it would prevent customers from continuing to seek services from People soft as a result of the fear of what a takeover by another company would imply.
Under these circumstances, if Oracle would have been willing to pay a higher price for the competitor’s shares to induce its shareholders into selling their shares, then the board would have been rendered helpless and unable to stop the former from taking over the company’s ownership.
A litany of scandals also worked against Oracle’s bid to acquire its competitor firm with critics terming the move as having been actuated by malice and being utterly insensitive, allegations which necessitated the management’s introduction of stringent measures to counter. This state of affairs held no grounds to victimize Oracle since not even a saintlier of evidence could be tabled to attest to that fact.
In spite of all the odds that surrounded the Oracle acquisition of People soft, certain measures had been put in place by the board of directors to ensure that in the event of an imminent takeover, a reasonable criteria would be observed to ensure that everybody’s best interests be taken into account.
Among those conditions to be considered included the introduction of a customer assurance plan which would ensure the protection of customer interests so as to build customer confidence. The board also put a lot of emphasis on the acquisition of J.D. Edwards so as to secure the company’s stability.
The rejection of the 16% share bid on the grounds of being too low also came up to be a determining condition for consideration by the board before making the all important decision of selling the company’s shares.
At the inception of People soft, foresight is quite evident since measures were put in place to ensure that in the event of a hostile and non-friendly acquisition of the company, formidable opposition would be rolled out to counter them. Popularly known as the poison pill, it basically stipulated conditions which failure to adhere to would deter one from assuming ownership of the company.
It stipulated conditions which included a minimum share purchase of not less than twenty percent which would increase every time an acquirer increased their net worth above that minimum. The objective of this move was to maintain an acquirer’s stakes at less than twenty percent.
Despite the well placed objective of seeing to it that a rogue takeover would not occur, the poison pill was not a complete barricade that would keep wealthy skimmers at bay since they could still take their time and wedge a proxy battle which would eventually see them install their own board members who would subsequently discard the poison pill.
These concerns hence formed the basis for the protracted court battles between the two companies which resulted in Oracle’s unprecedented increase of their bidding price resoundingly by five times. This move eventually brokered the deal which saw Oracle part with 10.3 billion dollars and eventually putting a stop to the unending court battles.
In conclusion, it is imperative to appreciate the fact that despite Oracle’s intensions which fueled the urge to acquire People soft company which were rather harsh and unethical, what is quite eminent is the fact that a more respectful and liberal approach towards acquiring the company by Oracle would have saved both companies time, money and the agony of going through the tedious court and settlement procedures.
References
Chaturvedi, R. (2005). Oracle’s Acquisition of PeopleSoft. ICFAI center for Management research. European Case Clearing House , Case no.305-169-1.
Madpati, R. (2005). Oracle’s PeopleSoft Bid (Part D). ICFAI Knowledge Center. European Case Clearing House , Case no. 305-072-01.
Watson, R. (2012). Ethics in finance. ethics and conduct of business, sixth edition , 341- 344.
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