The leader in customer relationship management, Salesforce (CRM) -5%, is acquiring a leading data analytics platform, Tableau (DATA) +35%, in an all-stock deal worth $15.7 bln.
For the second time in just over a year, Salesforce is showing that it is not afraid to make a bold strategic move to extend its lead in the cloud.
In March of last year, Salesforce paid $6.5 bln for MuleSoft, which was equivalent to ~16x sales estimates for 2018 or ~12x estimates for 2019.
That deal set the enterprise software sector on fire. Valuations have since grown to seemingly frothy, rather aggressive levels. There are now roughly three dozen software stocks that trade with a forward enterprise value/revenue multiple in the double digits.
Salesforce is acquiring Tableau in an all stock deal at a 42% premium to Friday's close. Tableau shareholders will receive 1.103 shares of CRM for each DATA share, valuing the company at ~11.5x revenue estimates for fiscal 2019 or 9.6x estimates for fiscal 2020. The deal is also equivalent to 80x FY20 EPS estimates or 70x FCF estimates.
Salesforce said the deal will reduce non-GAAP operating margins by 75 basis points and lower non-GAAP EPS by ~13% this year.
Founder, Chairman and co-CEO Marc Benioff is a cloud visionary who is much more focused on the long-term strategic importance of owning a best in class data analytics platform than some elevated near-term financial metrics. He noted that "Tableau helps people see and understand data, and Salesforce helps people engage and understand customers. It's truly the best of both worlds for our customers--bringing together two critical platforms that every customer needs to understand their world."
Last week, Alphabet (GOOG/L) acquired a big data/business intelligence company, Looker, for $2.6 bln. Alphabet is trying to close the gap for its Google Cloud Platform relative to Microsoft's Azure and Amazon Web Services.
This morning's deal has thrown gas on the fire of an already hot software sector. Software peers up in sympathy include Domo (DOMO) +15%, Alteryx (AYX) +6%, Splunk (SPLK) +6%, and SolarWinds (SWI) +6%.
A big deal like this leads many to wonder which company will get acquired next, but this deal could lead to a near-term top in sentiment after the hysteria dies down.