Salesforce’s $15.7 billion bet on Tableau
Salesforce is a customer relationship management software (CRM) company that helps businesses build strong relationships with their customers, create better conversations with clients, and improve revenue streams. Salesforce also helps companies get rid of their computer systems and move data to the cloud. Their software business generates $13 billion in annual revenue. Salesforce is the world’s largest seller of CRM software as the company currently owns about 20% of the market share. Salesforce is looking to take over more of the market as they just bought Tableau for $15.7 billion in an all-stock deal.
Tableau allows companies to build visual tools such as databases, spreadsheets, graphs, and so on from their data. It helps companies understand their data better. Tableau has more than 86,000 clients, including big names like Charles Schwab, Verizon, Netflix, Southwest Airlines, and more. The company generated $1.16 billion in revenue last year. Salesforce plans to keep Tableau working independently from it after the purchase. Tableau will keep its current CEO, Adam Selipsky, and Tableau will continue to have its headquarters in Seattle. The issue with the acquisition is that when Salesforce bought Tableau for over $15 billion, Tableau was only valued at $10.79 billion - according to figures on Google Finance. This means that Salesforce paid a 42% markup on the company. So, the question is: did Salesforce overpay for Tableau?
Salesforce’s investors reacted negatively to the acquisition, as the company shares dropped 5.2% after they had risen by 12% on the year. The fall most likely reflects investors’ concerns about the amount Salesforce paid and share dilution that occurs because of the all-stock purchase. However, Salesforce CEO Mark Benioff is unconcerned about the drop-in stock price and believes that they are “bringing together two critical platforms that every customer needs to understand their world.”
Although Salesforce and Tableau will be run independently, the two companies will be working closely together. Benioff is optimistic about how the two companies can go hand in hand as he has stated that since “Tableau helps people see and understand data, and Salesforce helps people engage and understand customers” then the acquisition has a huge upside. More specifically, Salesforce will use Tableau’s platform to work with their Einstein platform. Their Einstein platform is the base of all of Salesforce’s Artificial Intelligence initiatives. Salesforce’s Einstein makes AI-powered recommendations about which marketing strategies work best. The AI-platform uses data analytics to make these decisions, so with Tableau being one of the best analytics platforms, it is clear that Tableau will help the Einstein platform. As a result, there enormous upside from Salesforce buying Tableau, and I am optimistic that the acquisition will be worth it in the long run for Salesforce.
Written by Willie Turchetta
Edited by Alexander Versfeld & Alexander Fleiss