Salesforce to buy MuleSoft in a deal valued at $6.5 bn

Salesforce CEO Marc Benioff at Dreamforce 2017
CRM major Salesforce today revealed its strategy behind the MuleSoft deal valued at $6.5 billion.

The US-based MuleSoft makes software that provides enterprises with tools to automatically integrate various applications, devices and disparate data to help businesses networks run faster.

MuleSoft has more than 1,200 customers, including Coca-Cola, Barclays, Unilever, Mount Sinai, McDonald’s and Spotify, among others.

Marc Benioff, chairman and CEO, Salesforce, said: “Salesforce and MuleSoft will enable customers to connect all of the information throughout their enterprise across all public and private clouds and data sources — enhancing innovation.”

Salesforce and MuleSoft will accelerate customers’ digital transformations, enabling them to unlock data across legacy systems, cloud apps and devices to make smarter, faster decisions and create differentiated, connected customer experiences.

MuleSoft will be able to accelerate the growth of Salesforce and deliver more innovation to its business software customers.

Salesforce will use cash from its balance sheet and approximately $3 billion of term loans and / or the issuance of debt securities to fund the deal. Salesforce has obtained commitment from BofA Merrill Lynch for $3 billion bridge loan facility.

Salesforce Ventures, the company’s venture capital arm, led a $128 million funding round in MuleSoft in 2015.

MuleSoft listed on the New York Stock Exchange on March 17 last year at $17 per share. It closed up 40 percent on the first day of trading, giving it a market value of nearly $3 billion.

Salesforce holds more than 18 percent of the customer relationship management software market, followed by Oracle with 9.4 percent, according to 2016 figures provided by research firm IDC.

Meanwhile, rival SAP’s $2.4 billion acquisition of Callidus, expected to close in Q2 2018, will reset enterprise expectations of SAP in terms of managing complex business-to-business (B2B) sales, according to analyst firm TBR. Callidus provides both Configure, Price, Quote (CPQ) and sales performance management tools that complement SAP’s existing CRM and back-office software.

Analyst comments

Tough Salesforce could acquire its way into the ERP market, legacy giants SAP and Oracle, as well as custom-built ERP systems, will continue to occupy the majority of large enterprises’ back office IT environments, Kelsey Mason, senior analyst at TBR, in an analyst report said.

The report said the MuleSoft acquisition provides a small advancement toward Salesforce’s $20 billion revenue goal, bringing in nearly $300 million in revenue in 2017. MuleSoft aims for growth of more than 40 percent for 2018. Salesforce raised its FY22 guidance by $1 billion.

Salesforce’s distribution and sales channels will boost MuleSoft’s projected growth and long-term revenue trajectory. MuleSoft’s AnyPoint Platform can be deployed on premises or on the cloud, meaning term licenses are now a part of Salesforce’s financial profile. MuleSoft will be less than 5 percent of Salesforce’s overall revenue.

She said the inclusion of on-premises software is a departure from Salesforce’s age-old “No Software” mantra. This is ultimately a small sacrifice for Salesforce to make to ensure its place in customers’ digital transformations.

Baburajan K