Last month when Salesforce announced its acquisition of MuleSoft, many business leaders told this is one of the finest strategic acquisitions for Salesforce. Still, when we see the amount that Salesforce spent to acquire MuleSoft, it is bit surprising. No doubt, MuleSoft is one of the top company, but a $6.5 billion came out of nowhere. It looks hard to justify the purchase price of nearly 22 times trailing sales (sales, not earnings). According to the timeline published by Salesforce, they originally offered $38 per MuleSoft share, half in cash and half in stock. But, later MuleSoft CEO Greg Schott said to his Salesforce’s counterpart Marc Benioff that the price tag was $45 per share. On March 19 the deal was finalized, and they made it public on March 20th.
There was no bidding war for MuleSoft, as speculated by many analysts. As per the regulatory documents no other company was making move to buy MuleSoft. Salesforce is planning to pay a 30% premium for Mulesoft, compared with its average valuation in the weeks prior the agreement was announced. This was Salesforce’s biggest acquisition in a long time.
Salesforce was looking for a way where they can make better use of their customer data. MuleSoft has been doing well in their niche by selling software to gather data across a variety of databases. Even Salesforce participated in MuleSoft’s fundraising rounds in 2013 & 2017. But in past, both the companies never talked about a potential deal until February 2, when John Somorjai, Salesforce’s Executive Vice Chairman, emailed MuleSoft’s Schott to discuss a potential business partnership. The talks went for few weeks and finally, Salesforce made an offer on 5th March. Sensing the opportunity MuleSoft tried to negotiate the offered price and finally got what they want, except all the amount in cash. In the final terms, Salesforce agreed to pay $45 per share, 80% in cash and 20% in stock. This amount was a 32% premium over the MuleSoft’s public market value at that time.