NetSuite Partners Feel 'Pain' From Oracle, T. Rowe Price Brinksmanship

Oracle's coming up against a self-imposed deadline Friday night to proceed with its acquisition of NetSuite, but opposition from a large investment firm has left NetSuite partners anxiously waiting to learn if a deal with major repercussions on their businesses will go through.

T. Rowe Price, NetSuite's largest investor behind Oracle founder and chairman Larry Ellison, has been holding out for a higher valuation, looking for $133 a share from the enterprise software giant—in total about $2 billion more than the original price of $9.3 billion the companies agreed to in July.

The investment house has raised concerns about the process by which a price was established for the San Mateo, Calif. cloud software company, given Ellison's involvement with both software companies.

[Related: Partners" Oracle's Acquisition Of NetSuite Expected-Now Come The Questions Of Product Positioning]

For NetSuite partners, like Houston, Tex.-based Epiphany, the brinksmanship has major implications for their businesses.

"I've talked to a couple of different partners so far. This has become almost a crisis. It feels like everything has stopped cold," Brenda Brinkley, Epiphany's founder and CEO, told CRN. "For a partner, between this and watching the election, it's totally and completely painful."

With the acquisition in limbo, end-of-the-year deals aren't closing at the pace that they have in years past, and partners are in the lurch, she said.

"I've talked to two or three other partners. We're certainly not seeing that normal end-of-year push. It's usually hot and heavy at this time of year, but right now it's cold," Brinkley said.

Ellison provided much of the funding to get NetSuite off the ground almost two decades ago. Oracle's founder and current CTO maintained ownership of more than 47 percent of NetSuite's stock and often mentored the company's leaders.

T. Rowe said in a letter last week that it was exercising a fiduciary responsibility by refusing to tender its shares at the agreed upon price, which a committee within the firm disputed as a fair valuation after scrutinizing the negotiations with Oracle.

Friday's deadline is an extension from the original date set to withdraw the offer, prompted by T. Rowe's opposition.

Stockholders must tender more than half of NetSuite's unaffiliated shares—those that aren't owned by insiders like Ellison—for the acquisition to close at the price on the table.

John Hughes, co-founder of Chicago-based ManageForce, said the team at the Oracle and NetSuite partner are "eagerly waiting for a successful close."

ManageForce continues to see strong demand in the market for NetSuite products from current and prospective customers, Hughes said.

"But the investors seem to be playing games solely for the purpose of their own enrichment, which only seems to benefit them," Hughes told CRN.

And any delay in closing the deal is significant for partners, given the pace at which the cloud applications market moves, he said.

"So for every month the transaction gets delayed, it impacts customers' decisions, product strategy and innovation plans," Hughes said, as well as the go-to-market plans of Oracle, NetSuite and their partners.

ManageForce believes the unification of the companies is worth more than the sum of their parts, Hughes said, "so we’re very eager to learn the outcome, as I would suspect the customers and employees of each organization are as well."

Brinkley, of Epiphany, said she has seen an impact on buyers, and it appears rooted in NetSuite having stopped pushing deals.

With T. Rowe the only investor that's holding out, that could be a move by NetSuite to drive down business, putting pressure on the share value and with it, T. Rowe's proposed valuation and negotiating position.

NetSuite executives don't appear to be pouring energy into closing deals of late, Brinkley told CRN.

"Theoretically, it shouldn't matter. NetSuite is going to be NetSuite," Brinkley said. "But it seems to matter to the buyer. I feel like [NetSuite sales leaders] are holding back."

"This just smells and feels like politics and posturing," Brinkley said. "It's like game-face on, and who's going to flinch first."