Salesforce.com, which has established itself as a leader in the enterprise cloud computing space with a broad array of services and their portfolio of incredibly powerful online sales applications, made a bold move yesterday (June 4) to cap off recent expansion by the company into being a comprehensive service provider with HR and marketing tools in the cloud (a process spearheaded by CEO of CRM, Marc Benioff), as the company secures a firm footing in social marketing with the announced acquisition of ExactTarget, Inc. for a reported $2.5B.
This is a solid move by CRM to capture valuable territory in mobile marketing and they have the overall market presence, as well as the cloud muscle to really make something of this move. Furthermore, CEO Benioff’s driving taste for growth, which has scared earnings-focused investors in recent quarters, looks to be curbed as he sinks his teeth into this juicy morsel, noting a 12 to 18 month cessation of M&A activity to analysts in a recent conference call.
From a wider angle we see a very clever strategy to exploit the company’s now substantial footprint in cloud playing out nicely. Stack this deal up against the Radian6 (social listening) and Buddy Media (publishing/advertising) acquisitions for a second and consider Benioff’s vision to grab the hot property in email and social marketing, ExactTarget. While some analysts have raised concerns about how accretive to revenue generation this deal will ultimately be (Sanford C. Bernstein & Co.), Benioff’s impressive track record for boosting top line growth at Salesforce.com, by picking up the best-in-class targets, speaks louder than critics of the company’s acquisition strategy.
The company reportedly dropped $680M on the Buddy Media deal and this move to further shore up their position in social media via the ExactTarget acquisition is the biggest in the company’s history, a real milestone, marking the end of an eight-company buying spree over the last year. This is a shrewd strategy to position CRM as a social marketing leader with tight integration into helping brands manage their increasingly important presence on sites like Facebook and Twitter.
ExactTarget has some of the best internet-based marketing solutions available and has over 6k customers, including giant multinationals like Coca-Cola, Gap, and Nike. The comprehensive suite of marketing products they offer, including cutting-edge ways to personalize email and text messages, as well as run ad campaigns that make full use of the social media platforms, will help CRM deliver a much better value to their growing customer base. This activity is mirrored by other software service players like Oracle, who has made 14 acquisitions in the last year alone, compensating for a slowing traditional business in the broader space and smaller players taking advantage of social media, driving the business forward through growth by aggressive acquisition.
We have BofA Merrill Lynch doing the financial advising on the deal with JP Morgan advising and this deal will end up being financed by cash on hand and a term loan by CRM, who had around $3.1B on cash and marketable securities going into Q1. While the deal is projected to impact operating cash flow substantially (down nearly half to $80M), CRM is saying FY14 revenue is expected to increase to $125M
For more info on Salesforce.com, Inc. check out their website www.Salesforce.com
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