Contact: Brenon Daly
In the largest-ever transaction in the rapidly emerging marketing automation industry, salesforce.com said on June 4 it will hand over $2.5bn in cash for ExactTarget. The deal represents a significant bet by the SaaS kingpin, which has talked about cross-channel marketing becoming a $1bn business in the coming years. Salesforce.com will nearly clean out its coffers to cover its purchase of ExactTarget, which is three times the size of salesforce.com’s second-largest deal.
Under terms, salesforce.com will hand over $33.75 for each share of ExactTarget. That represents the highest-ever price for the 13-year-old marketing automation vendor, which went public in March 2012 at $19. (J.P. Morgan Securities led ExactTarget’s IPO and advised the company on its sale. Bank of America Merrill Lynch worked the other side.) The deal is expected to close by mid-July.
At an enterprise value of $2.4bn, ExactTarget’s valuation of roughly 7.6 times trailing sales splits the difference between the two previous largest transactions in the marketing automation space. In December 2012, Oracle paid an uncharacteristically rich 9.7 times trailing sales for Eloqua, and Teradata paid 6.5 times trailing sales for Aprimo in December 2010, according to the 451 Research M&A KnowledgeBase. (For its part, rival Marketo, which salesforce.com and others were rumored to have looked at last fall, trades at nearly twice ExactTarget’s multiple.)
With the purchase of ExactTarget, the three largest deals salesforce.com has done have all been aimed at expanding the company’s marketing offering. It picked up Buddy Media in mid-2012 for $689m for its agency relationships after spending $326m on social media monitoring startup Radian6 in March 2011. But don’t look for any more deals in that space or any other from salesforce.com soon. During a call discussing the ExactTarget purchase, CEO Marc Benioff said salesforce.com will be on ‘vacation’ from M&A for the next 12-18 months.
Contact: Brian Satterfield
As more businesses leverage social networking websites for marketing and customer support purposes, many big-name buyers are finding social media software vendors to be increasingly attractive targets. The number of deals in the sector rose more than 150% in 2011 from 2010, while spending during that same period soared more than five-fold from $75m to $389m.
The bulk of 2011 social software spending came in March, when salesforce.com forked over $326m for Radian6, a Canadian startup that had raised just $6m. Radian6 was both the CRM giant’s largest deal as well as the priciest transaction ever in the sector. Salesforce.com bought Radian6 in order to add social media monitoring features to a number of products in its portfolio. On a smaller scale, we saw similar purchases around that same time by Meltwater Group, which added JitterJam for $6m, and call-center software maker KANA Software, which reached for Overtone.
But enterprise software providers aren’t the only takers in the social software world. Many tech companies that have partial or completely social business models got in on the action, presumably in order to track activity on their own networks. Twitter, for instance, picked up social media monitoring software maker BackType, while Google bought a similar company called PostRank.
Contact: Brenon Daly
At the rate Marc Benioff is going, we have to wonder how long it will be until he renames the company he founded. Or at the very least, shouldn’t Benioff, who founded salesforce.com in 1999 and continues to serve as the company’s CEO, be thinking about swapping the company’s current ticker (CRM) for something that captures the broad, all-encompassing vision for the ‘social enterprise’ that he laid out at last week’s Dreamforce?
After all, the company’s core sales force automation (SFA) product barely merited a mention at the conference. Instead, most of the attention was directed toward upgrades and expansions to the Chatter and Radian6 offerings, as well as moves to broaden its two main platform plays, Heroku and Force.com. As such, Dreamforce dramatically underscored just how much of salesforce.com’s future has been staked on its M&A program.
Of course, virtually all tech vendors use acquisitions to change the trajectory of their business, whether it’s a slight nudge in some new direction through a tactical purchase (Informatica comes to mind) or roll-the-dice-and-bet-the-company transformational transactions (Dell and, more painfully right now, Hewlett-Packard.) But hardly any other tech company (with the possible exception of VMware) has used M&A so consistently to expand beyond its original offering while still managing to preserve an acrophobia-inducing valuation.
Just consider the role that acquired companies played in announcements around salesforce.com’s conference:
- Chatter has been bolstered by the purchase of two firms (GroupSwim and Dimdim), as has Service Cloud (InStranet and Activa Live). Service Cloud is salesforce.com’s largest non-SFA product.
- The Data.com product, which was launched at the show, goes back to the purchase of Jigsaw Data in April 2010. It was further bolstered last week through a partnership with company records provided by Dun & Bradstreet.
- Heroku was acquired last December, and salesforce.com noted at the conference that the platform currently has triple the number of customer applications built on it than it did a year ago.
- The social media monitoring capabilities that salesforce.com obtained with its acquisition of Radian6, which was announced in late March, are only starting to make their way into the products but are a key part of the ‘social enterprise’ that the company has described.
Altogether, salesforce.com noted that non-SFA offerings – in other words, products and technology that got significant boosts through acquired IP or engineers – accounted for a full 20% of second-quarter revenue. (That was the first time the company has broken out revenue for its new products.) Given that salesforce.com booked nearly $550m in Q2 revenue, that would imply non-SFA sales of about $110m. To be clear, very little of that amount has come directly from the acquired companies, all of which were still in their early days. Instead, it’s the net result of the ‘buy and build’ approach at salesforce.com.
Contact: Brenon Daly
Salesforce.com just keeps taking bigger bites. The company announced Wednesday that it will hand over $326m ($276m in cash and $50m in stock) for social-media monitoring company Radian6. Not only is it salesforce.com’s highest-priced acquisition, it also likely brings more revenue than any other deal the company has done, at least based on our estimates for previous transactions and the company’s guidance for Radian6. Salesforce.com indicated that the Canadian startup would contribute about $50m in sales during the current fiscal year, which is about two months old.
The purchase, which is expected to close by July, also puts an exclamation point on the changes in dealmaking at salesforce.com. The 11-year-old SaaS pioneer stayed out of the M&A market for the first half of its corporate life. And even when it started doing deals in 2006, the first half-dozen or so acquisitions were all small, valued in the low tens of millions of dollars. Salesforce.com only started announcing major purchases last year, with its $142m reach for Jigsaw Data followed by its $249m takeout of Heroku.
As sizeable as the deal is inside saleforce.com, it also looms pretty large inside the burgeoning social CRM market. Consider this: at roughly one-third of a billion dollars, salesforce.com’s pickup of Radian6 is more than 50 times larger than the acquisition of another social CRM startup just last week. Privately held Meltwater Group paid just $6m for JitterJam to bolster its social CRM offering, which the company hopes to be a $100m business within three years.