On Thursday, Salesforce announced that it would pay $1.9B in cash for Own Co., a startup specializing in tools for backing up data in cloud-based applications. Salesforce intends to close the deal in the quarter ending in January 2025 if regulators do not create any issue, as per the statement. Own is Salesforce’s biggest acquisition since buying Slack for $27.7 billion in 2021.
Salesforce’s acquisition of Own comes at a time when customers are increasingly focused on mitigating data loss due to system failures, human error, and cyberattacks. Salesforce said it expects to achieve accretion on a free cash flow basis starting in the second year following the closing of the deal.
Salesforce buys Own
The startup, formerly known as OwnBackup, was valued at $3.35 billion in a 2021 funding round. Salesforce Ventures, the cloud software company’s venture arm, invested in that round and earlier ones.
The proposed deal would mark the return of sizable deals for Salesforce, less than two years after co-founder and CEO Marc Benioff said the board was eliminating a committee on mergers and acquisitions.
There is no anticipated change to the enterprise cloud firm’s fiscal year 2025 forecast and the deal will not impact its capital return program, Salesforce said.
Salesforce’s expensive assets
Benioff’s pronouncement came after activist investors bought stakes in Salesforce and raised questions about profitability after the company had splurged on expensive assets, including MuleSoft and Slack, without delivering major growth in return.
The decline in value for Own reflects a more sluggish backdrop for software companies.
Own’s funding
Own has raised more than $500 mln in total funding from BlackRock , Salesforce Ventures and Tiger Global, among others, and has partnered with ServiceNow and Microsoft Dynamics 365, according to its website.
Own, which had specialized in helping Salesforce clients, sought to diversify. In its 2021 funding announcement, it touted its intent to work with Microsoft’s Dynamics enterprise software that competes with Salesforce’s core applications. Support for ServiceNow followed.
Salesforce further acquisition plans
Salesforce on Tuesday said it has agreed to acquire Tenyx, which develops artificial intelligence-powered voice agents, to advance its AI-driven solutions, without disclosing the deal value.
Last year, under pressure from activist investors, Salesforce announced plans to double its share buybacks and shift away from acquiring more companies after disbanding its mergers and acquisitions committee.
The California-based company is now looking at acquisitions to re-accelerate its revenue growth.
In April, data-management software maker Informatica said it was not in talks to be acquired after media outlets reported Salesforce was interested in buying the company for around $10 billion. Salesforce and Informatica deal collapsed due to pricing.
“We’re going to be looking at products organically, but, yes, we will continue to look at products inorganically,” Benioff told analysts on Salesforce’s May earnings call. “But as we’ve committed to you, if we’re looking at a large-scale acquisition, we’re going to make sure that it is not dilutive to our customers, that it’s accretive, that it has the right metrics.”
Salesforce acquisition of Own impact on investors
Salesforce said the Own acquisition will not it’s shareholder return initiatives, and said the deal would be accretive to free cash flow starting in the second year after the deal closes.
Stock update
Salesforce stock was down 0.63% at a price of $246.12. After hours too fell but by 0.074%. Overall the market was red with the S&P 500 dipping 0.3% to end at 5,503.41. While the Dow Jones Industrial Average lost 219.22 points, or 0.54%, to settle at 40,755.75. The Nasdaq Composite gained 0.25% to finish at 17,127.66, after rising as much as 1.2% earlier in the session.
