SalesForce’s $15.7 billion Tableau deal leaves investors wondering

Author: Lindsey Boycott

Estimated read time: 4 minutes

Publication date: 17th Jun 2019 10:15 GMT+1

Some say fortune favors the bold and giant SalesForce’s (NYSE: CRM) decision to buy big-data company Tableau for $15.7 billion is certainly not for the faint of heart. They unveiled their newest addition to the SalesForce family last week after the two companies reached an agreement for an all-stock purchase of Tableau.

The deal means that that Tableau shareholders will get 1.103 SalesForce’s shares for their analytics company, worth $177.88 at closing Friday June 7. It’s estimated that the acquisition price signifies a 42 percent top-up over Tableau’s market value which led to a subsequent surge in the company’s stock by as much as 35 percent – at $169.50 – the following Monday.

The enterprise-giant revealed their intent to join data-forces with Tableau only a week after Google’s announcement to acquire analytics firm Looker for $2.6 billion last week. While big data has been a term that’s been bandied about for the better part of a decade, it appears that tech titans are preparing to make analytics their new battleground.

“Recall…Google’s [recent] announced it would acquire disruptive, fast-growing private data analytics vendor Looker. The analytics space clearly is seeing strategic interest,” said Terry Tillman, analyst with SunTrust Robinson Humphrey, in a note to his clients.

Investors keen to sidestep tensions surrounding global trade talks might turn to possibilities in the analytics sector as a safer – and with promises of profitability – bet for their portfolios. Stocks in the data market surged after the Google and SalesForce deals were rolled out in the first half of June – with Splunk’s stocks jumping by 6.4 percent to $118.51 Alteryx upticking 2.8 percent to 97.81 and Anaplan increasing 0.6 percent to $48.31.

SalesForce’s announced acquisition helped the market rally after antitrust concerns took the Nasdaq composite down by 1.6 percent in a day at the beginning of June. While the company’s announcement may have buoyed the tech market, the CRM company saw a 6 percent in the afternoon’s trading.

There has been a lot of speculation about SalesForce’s pricey purchase of Tableau with some analysts pondering whether investors are balking at this buy-out because it may be covering a slump in the CRM-supplier’s own sales. “[Their] shares are trading down, maybe out of fears that the company is buying growth because organic growth is slowing, It’s a natural question to ask,” Steve Koenig, a Wedbush Securities analyst, said in an Observer article.

Others have pointed to enterprise giant’s slight dip in stock prices as nothing more than a temporary trend down. “Although SalesForces is trading lower this morning on the deal, we believe this will prove short lived,” Brian White, an analyst with Monness, Crespi, Hardt & Co., said in an Investor’s Business Daily article. “In a volatile market environment driven by growing trade tensions with China, we believe SaaS vendors such as SalesForce remain attractive.”

Another perspective is that SalesForce has expanded largely due to their aggressive M&A strategy – akin to those practiced by both Oracle and Microsoft. They’ve augmented their sales software offerings acquired new clients and been introduced to new markets by writing big checks with multiple zeros.

The software company’s larger-than-life $15.3 billion Tableau deal of 2019 is just the latest in a long string of larger-than-life deals – such as their $6.5 billion acquisition of MuleSoft in 2018. With SalesForce’s long history of buying what CEO Marc Benioff believes will be the next-big-thing, the Tableau deal may not signify anything more than Benioff doing what he does best – see possibility and pursuing it.

While going big is definitely Benoiff’s modus operandi, it has created some friction for his company’s investors in the past. In 2017, SalesForce decided to slow things down after a series of deals made raised concerns about its core business strength – as to be expected, mad-scientist entrepreneurs and their backers will not always have a similar view of things. Benioff defends his most recent acquisition:

“Tableau is all about people seeing and understanding their data, servicing actual insights for every business user,” Benoiff said in a conference call. “And SalesForce is all about helping people engage with and understand customers delivering connected, integrated, intelligent customer experiences across every business process. And now together, we have the leading products in these most important categories, underlying digital transformation, the very cornerstones of digital transformation.”

SalesForce is a leader In the customer relationship management software market and as far Benioff concerned, the investors will see – as they always do – that Tableau is the yin to the S Force’s yang.

Disclaimer: The writer is an experienced financial consultant who writes for The observations he makes are his own and are not intended as investment or trading advice.