Putting all rumors to rest, world’s leading CRM platform provider salesforce.com Inc. CRM yesterday confirmed its acquisition of a six-year old startup, SteelBrick in a regulatory filing. However, the deal is worth almost half of the rumored amount of $600 million.
In a SEC filing, Salesforce revealed that it has acquired the San Mateo-based sales software start-up for $360 million. The deal is anticipated to close in Apr 2016.
Last week, citing sources familiar with the matter, The Information had reported that Salesforce is in talks to acquire SteelBrick. We believe that the difference in the rumored and actual price may be due to consideration of Salesforce’s existing stake in SteelBrick.
Founded in 2009, SteelBrick offers quote-to-cash technology, which simplifies the sales process of companies by automatically generating quotes, contract and billing, thereby making it easier for sales people to come up with the final proposal and prices for potential customers.
Since its inception, the company has raised more than $77 million. In October, it raised $48 million and Salesforce was one of the investors. The company was estimated to be worth $250 million in October.
Salesforce has always been active in acquiring businesses which have huge growth potential. The company’s acquisitions over the past one year have been mainly focused on enhancing its marketing and analytics businesses. However, the SteelBrick buyout will give a boost to its Sales Cloud business which is witnessing a slow growth rate.
It should also be noted that SteelBrick has a competitive advantage over the likes of BigMachines, owned by Oracle Corp. ORCL, as the company mostly deals with small- and medium-size enterprises. On the other hand, BigMachines’ software is too expensive for this category.
Further, citing a report from IT research firm Gartner Inc. IT, Business Insider revealed that the overall quote-to-cash market would cross $41 billion by 2018. Therefore, we believe that this acquisition will help Salesforce grab significant market traction in this space.
Investments in startups have always been one of the key growth strategies of Salesforce. Over the past few years, the company has invested in several startups, through acquisitions as well as partnerships. According to a report by TechCrunch, since 2009, Salesforce Ventures, the company’s investment arm, has invested about $500 million in more than 150 enterprise start-ups.
Further, it should be noted that this October, Salesforce Ventures announced its plan to invest $100 million specifically in European startups with the goal of fueling cloud innovation and picking up a few customers in the process.
We believe that Salesforce’s sustained focus on expanding its business through strategic takeovers and investments will drive growth over the long term.
Salesforce currently carries a Zacks Rank #2 (Buy). Another stock in the broader technology sector worth considering is Datawatch Corporation DWCH, which sports a Zacks Rank #1 (Strong Buy).
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