(Bloomberg/Ryan Gould and Brody Ford) — Salesforce Inc.’s agreement to buy Informatica Inc. for $8 billion came a year after initial talks collapsed and the acquisition target lost a third of its market value, lowering the price it was willing to accept for a deal.
The result, according to Salesforce executives and other people close to the negotiations, is evidence of the software giant’s more-disciplined approach to dealmaking after working several years to reduce costs and improve profitability. That patience was imposed by major shareholders who helped scuttle a purchase of Informatica in early 2024.
“We were very close to doing this deal a year ago, but the price was not right,” Salesforce Chief Executive Officer Marc Benioff said in an interview. He then stayed in contact with Informatica Chief Executive Officer Amit Walia until the time was right, Benioff said.
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Last week, that time came. Salesforce sealed a purchase on May 27 for the data integration software provider at $25 a share — 35% less than Informatica’s share price before the initial talks became public in April 2024. It marks serial acquirer Salesforce’s return to making big deals after facing years of skepticism from investors about its M&A strategy.
“In conversations with critical investors — they want to make sure that we pay the right price, that it’s not dilutive, it only costs one or two quarters of cash flow, that we are disciplined in our approach,” Benioff said. “For all those reasons a year ago, it could not come together. For all of those reasons it did come together last week.”
In early April, Informatica’s share price had declined by half from the prior year, meaning an acquisition this time around would likely come at a significant discount to the $10 billion price tag being discussed a year earlier. John Somorjai, longtime corporate development head at Salesforce, and his advisers at JPMorgan Chase & Co., reached out to Informatica’s board with an interest in rekindling their courtship.
For Informatica, a greater need for data integration services to facilitate AI use had put its offering firmly in the crosshairs of industry players including Cloud Software Group Inc., formerly known as Citrix Systems Inc., as well as buyout firms like Thoma Bravo. Informatica instructed bankers at Goldman Sachs Group Inc. to kick off a market check that it hoped would validate the value of its data-organization technology in the age of AI.
“Project Inspire” was the code name for the potential deal within Informatica. At Salesforce, insiders gathered to talk about “Project Sunshine.” As the idea of the combination began to take fuller shape, the name became “Project Kailash” — a reference to the sacred mountain in the Himalayas that’s revered as the home of Hindu god Lord Shiva.
The sale process was accelerating at pace by the end of April and remained competitive until roughly 24 hours before Salesforce had a handshake agreement with Informatica, and just prior to a Bloomberg News story that said the two companies were in talks about a deal that could be announced within days, the people familiar said.
“We were lucky to be the winning bid,” Benioff said.
Details of Salesforce’s pursuit of Informatica were relayed by multiple people involved in the discussions, all of whom asked not to be identified discussing private details. Salesforce declined to comment on some of the details. Informatica didn’t respond to a request for comment.
Activist Pressure
Understanding the stakes at play for Salesforce means rewinding back to late 2022. Over the course of a few months, the San Francisco-based company had seen a rare pile-on from a who’s-who list of activist investors, including Starboard Value LP, Elliott Management Corp., ValueAct Capital Management LLC and Third Point LLC. They’d come armed with critiques of Salesforce’s slowing revenue growth, lack of cost discipline, ballooning headcount, and an M&A record that they said was unfocused and expensive.
The prior year, Salesforce had closed its $27.7 billion deal for workplace collaboration firm Slack Technologies Inc. That transaction was its biggest yet — dwarfing its purchases of Tableau Software Inc. and MuleSoft Inc. The company had spent some $50 billion in three years, and patience in Benioff’s strategy was wearing thin. Salesforce responded by cutting about 10% of its workforce, setting an aggressive profit goal and adding a ValueAct representative to its board. The message: We hear you.
So when word started to get out in April 2024 that Salesforce was in advanced talks to acquire Informatica for about $10 billion, investors were quick to let the company know their thoughts on the proposed deal. Salesforce’s stock slid more than 7% in the following trading session, wiping roughly $20 billion in value from its market capitalization.
The two companies had already agreed to contracts, a price was all but finalized and a date for the public reveal was just a few days away, according to the people familiar with the process.
Salesforce, in a quiet period ahead of reporting earnings for its fiscal first quarter for 2025, was hamstrung: It could say little about the deal’s rationale, explain the strategic fit, or defend the rumored $10 billion price tag. Analysts and shareholders might have been more forgiving with a $2 billion tuck-in than a big headline swing. Like Informatica’s private equity backers, Permira and Canada Pension Plan Investment Board, Salesforce was left ruing a near miss.
In the interim, away from the spotlight of still unconfirmed deal talks with Salesforce, Informatica was at work to strengthen its profile. But it was going into its fourth quarter earnings period braced for a 4.1% slip in revenue, amid a backdrop that had seen Permira and CPPIB sell a slug of shares worth $408 million.
Return to Talks
Robin Washington, Salesforce chief operating and financial officer, said the recent deal was as much about getting “our arms around the valuation” as it was the timing. “We were patient, we were disciplined, and felt that now was the right time to put the marriage together,” she said in an interview. “One of the things that we’ve been really focused on is just good discipline when it comes to M&A.”
As with Alphabet Inc.’s on-again, off-again pursuit of cybersecurity upstart Wiz Inc., which culminated earlier this year in a $32 billion friendly takeover, timing — and discipline — can be everything in dealmaking. While the rationale and the fit were much the same 12 months ago, the maturity and understanding within the industry about the demand for data to feed AI made the takeover more acceptable this time.
“The world of generative AI cannot come to fruition without the foundation of good data,” Informatica’s Walia said in a Bloomberg Television interview. “They talked to customers, we talked to customers. And to me, it was the right time for us to come together.”
–With assistance from Liana Baker.
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