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Salesforce Goes the Acquisition Way Again, Plans to Buy Krux

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Acquisitions have always been one of, Inc.’s (CRM - Free Report) key growth strategies. Reportedly, the company entered into a definitive agreement to acquire San Francisco-based company Krux for approximately $700 million. Per this cash-stock type deal, the company will pay $340 million in cash and the remaining in Salesforce shares. The acquisition is expected to close on Jan 31, subject to customary closing conditions.

What Makes the Krux Acquisition Important?

For the past couple of years, Salesforce has been aggressively acquiring companies that operate mostly in the software and artificial intelligence space such as Demandware, BeyondCore and MetaMind among others. The Krux acquisition will provide Salesforce the platform to build its marketing intelligence system.

Founded in 2010, Krux serves as an intelligent marketing hub that specializes in data analysis. The company helps marketers, media companies and agencies to better serve customers through its data tools and improves business performance. The company has raised funding of approximately $50 million so far.

The merger makes perfect sense as it will not only expand Salesforce’s products against growing competition from bigger rivals such as Microsoft Corp. (MSFT - Free Report) , Oracle Corp. (ORCL - Free Report) and SAP SE (SAP - Free Report) but will also shape a brighter future for the company.

We believe that by using Krux’s marketing services, Salesforce will not only enhance process efficiency of both the companies, but will also make the CRM platform more competent in handling sales, marketing and service functions.

According to a media report, ‘’Salesforce has been putting a lot of focus on boosting its data and predictive analytic capabilities lately, and Krux's software is expected to help Salesforce's marketing cloud offerings.”

Salesforce has made a number of acquisitions of late with the intention of diversifying its offerings and expanding its markets. Its strong cash balance ($1.174 billion in the second quarter of 2017) and robust operating cash flow ($1.301 billion during the first half of fiscal 2017) enable the company to go for strategic acquisitions.

Last Words

Acquisitions have always been one of Salesforce’s key growth strategies. In the last one and half years, the company has closed a number of takeovers worth over $4 billion.

This year alone, the company has completed or is in the middle of as many as eleven acquisition deals. These also include its biggest ever buyout – Demandware – concluded this July.

The successful integration of Krux should enable the company to concentrate more on its core business, translating into new products and a more focused sales team.

We believe that Salesforce’s sustained focus on expanding its business through strategic acquisitions and investments will drive growth over the long run.

However, continued weakness in Europe, currency headwinds and increased investments in research & development will keep margins under pressure.

Currently, Salesforce has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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