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Salesforce to Acquire MuleSoft, Its Biggest-Ever Buyout Deal
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Salesforce.com, Inc. (CRM - Free Report) is set to buy an integration software maker, which will mark the company’s third acquisition this year and the biggest ever in its history. Recently, the company entered into a definitive agreement to acquire MuleSoft, Inc. for an enterprise value of approximately $6.5 billion.
Founded in 2006, MuleSoft designs platforms for connecting applications, data, and devices across any cloud, as well as on-premise, thereby helping clients “to change and innovate faster, deliver differentiated customer experiences, and increase operational efficiency.” The company claims to have more than 1,200 customers, which includes biggies like Coca-Cola (KO - Free Report) , Mc Donald’s and Barclays.
The acquisition will add value to Salesforce's existing Platform-as-a-Service (PaaS) portfolio. Upon successful completion of the transaction, the world’s leading customer-relationship management solution provider plans to create “Salesforce Integration Cloud” service. By availing this service, clients will have more and easy access to corporate data irrespective of the storage locations.
Financial Terms of the Transaction
The transaction will be of cash-stock type, wherein Salesforce will pay $36 for each of the target company shares, and 0.0711 shares of its own per MuleSoft Class A and Class B common shares. Based on Salesforce’s Mar 19 closing price, the cash-stock transaction amounts to $44.89 per share, reflecting a 36% premium to MuleSoft’s closing share on Monday.
Salesforce intends to fund the acquisition with available cash in hand and a $3-billion borrowing through term loans or issuance of debt securities. The deal, subject to customary conditions and expiration of waiting period under Hart-Scott-Rodino Antitrust Improvements Act, is expected to close by this July.
In addition, this is the largest-ever acquisition made by the company. Prior to this, the purchase of software-as-a-service e-commerce solutions provider — Demandware, Inc. — for roughly $2.8 billion was its biggest buyout move.
Rationale Behind the Deal
We believe the acquisition will not only enhance its process efficiency but will also make Salesforce’s platform more efficient in handling sales, marketing and service functions. The deal will also help Salesforce expand its corporate software offerings and compete effectively with its arch rivals in the space — Microsoft Corporation (MSFT - Free Report) and Oracle Corporation.
Furthermore, MuleSoft is growing rapidly and registered a 58% year-over-year surge in 2017 revenues. This implies the buyout will be immediately accretive to Salesforce’s top-line results.
This apart, Salesforce will gain a huge client base of more than 1,200 to whom it can sell its complementary products, thereby generating additional revenues.
The MuleSoft buyout deal highlights Salesforce’s aggressive approach to attain its target of reaching $20 billion in revenues by 2022. Cloud computing is a flourishing part in the technology space and has been gaining momentum in recent years. Therefore, Salesforce has been acquiring assets across the globe to achieve its long-term goals.
It should be noted that acquisitions have always been one of Salesforce’s key growth strategies. Although the company remained almost silent throughout 2017 on the acquisition front (just one — Sequence), this year it might repeat the likes of 2016, when Salesforce bought 12 companies, to boost its capabilities, and grab newer and larger markets.
We believe Salesforce’s continued focus on expanding business through strategic acquisitions and investments will drive growth over the long run.
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Salesforce to Acquire MuleSoft, Its Biggest-Ever Buyout Deal
Salesforce.com, Inc. (CRM - Free Report) is set to buy an integration software maker, which will mark the company’s third acquisition this year and the biggest ever in its history. Recently, the company entered into a definitive agreement to acquire MuleSoft, Inc. for an enterprise value of approximately $6.5 billion.
Founded in 2006, MuleSoft designs platforms for connecting applications, data, and devices across any cloud, as well as on-premise, thereby helping clients “to change and innovate faster, deliver differentiated customer experiences, and increase operational efficiency.” The company claims to have more than 1,200 customers, which includes biggies like Coca-Cola (KO - Free Report) , Mc Donald’s and Barclays.
The acquisition will add value to Salesforce's existing Platform-as-a-Service (PaaS) portfolio. Upon successful completion of the transaction, the world’s leading customer-relationship management solution provider plans to create “Salesforce Integration Cloud” service. By availing this service, clients will have more and easy access to corporate data irrespective of the storage locations.
Financial Terms of the Transaction
The transaction will be of cash-stock type, wherein Salesforce will pay $36 for each of the target company shares, and 0.0711 shares of its own per MuleSoft Class A and Class B common shares. Based on Salesforce’s Mar 19 closing price, the cash-stock transaction amounts to $44.89 per share, reflecting a 36% premium to MuleSoft’s closing share on Monday.
Salesforce intends to fund the acquisition with available cash in hand and a $3-billion borrowing through term loans or issuance of debt securities. The deal, subject to customary conditions and expiration of waiting period under Hart-Scott-Rodino Antitrust Improvements Act, is expected to close by this July.
In addition, this is the largest-ever acquisition made by the company. Prior to this, the purchase of software-as-a-service e-commerce solutions provider — Demandware, Inc. — for roughly $2.8 billion was its biggest buyout move.
Rationale Behind the Deal
We believe the acquisition will not only enhance its process efficiency but will also make Salesforce’s platform more efficient in handling sales, marketing and service functions. The deal will also help Salesforce expand its corporate software offerings and compete effectively with its arch rivals in the space — Microsoft Corporation (MSFT - Free Report) and Oracle Corporation.
Furthermore, MuleSoft is growing rapidly and registered a 58% year-over-year surge in 2017 revenues. This implies the buyout will be immediately accretive to Salesforce’s top-line results.
This apart, Salesforce will gain a huge client base of more than 1,200 to whom it can sell its complementary products, thereby generating additional revenues.
Salesforce.com Inc Price
Salesforce.com Inc Price | Salesforce.com Inc Quote
Bottom Line
The MuleSoft buyout deal highlights Salesforce’s aggressive approach to attain its target of reaching $20 billion in revenues by 2022. Cloud computing is a flourishing part in the technology space and has been gaining momentum in recent years. Therefore, Salesforce has been acquiring assets across the globe to achieve its long-term goals.
It should be noted that acquisitions have always been one of Salesforce’s key growth strategies. Although the company remained almost silent throughout 2017 on the acquisition front (just one — Sequence), this year it might repeat the likes of 2016, when Salesforce bought 12 companies, to boost its capabilities, and grab newer and larger markets.
We believe Salesforce’s continued focus on expanding business through strategic acquisitions and investments will drive growth over the long run.
Salesforce currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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