Salesforce Rethinking Twitter Acquisition

Posted by XNA on October 9, 2016 in Current Events | Short Link

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Salesforce.com which appeared to be in pole position to acquire Twitter following withdrawals of other leading suitors might now be forced to back out as a result of pressure from its investors.

Search giant Google, Apple and Disney were among the leading companies thought to be interested in buying Twitter, but all of them have now indicated that they would not make any offer for the social media site.

The withdrawals of these other lead suitors had put Salesforce in the lead as the potential buyer. Its chief executive Marc Benioff is believed to be particularly interested in acquiring Twitter, but his optimism appears not to be shared by investors in the cloud computing company.

Shareholders are lost on what value a troubled company that is being ditched by some of its investors could add to Salesforce. The New York Times reports that these investors have made it clear to Benioff that they are not in support of a Twitter acquisition.

Those calling for the plug to be pulled on the deal are led by Fidelity Investment, the company’s largest shareholder with around 14 percent stake. People familiar with the matter told the NY Times that some of the investors have threatened to sell their stock.

It now appears that Benioff has started to have second thoughts about the Twitter deal, based on his remarks at an investor meeting in San Francisco on Wednesday. He stated that he had read all notes and emails from the shareholders of Salesforce.

“And as I digest all of that information, this is actually the No. 1 thing that has been on my mind,” Benioff said. “In some cases, we have been unusually surprised and we have had to do a reset.”

Salesforce knows it has to be careful with how it deals with its investors, especially in the light of its profitability challenges. It relies significantly on stock to pay its employees and process acquisitions. The customer management software company reportedly paid its employees $593.6 million in stock-based compensation during its fiscal year that ended January 31.

The company has some big names among its shareholders, including T. Rowe Price, BlackRock and Sands Capital Management, so it knows it has to be careful with a Twitter deal. A source said the investors have effectively put an end to any potential acquisition. It is unclear if the company’s CEO would continue in his pursuit, but that now looks unlikely.

News broke on September 23 that Salesforce was in talks with Twitter over an acquisition deal. This led to some investors selling off their shares, driving down price by about 8 percent over the following 10 days.

The cloud computing company previously tried to acquire the professional social network LinkedIn, but it lost that to Microsoft in June. The loss to the tech giant came despite Salesforce offering a better deal. But it relied on stock in that deal while Microsoft offered $26.2 billion in cash.

Analysts say Benioff knows that any action that makes shareholders to sell off their stock would certainly drive down value. This would harm the company’s ability to pull off successful deals.

Founded in 1999, Salesforce has grown to become a public company with a value of about $49 billion. Share price has shot up from an IPO value of $11 to over $70.

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