Salesforce has announced that it has reached an agreement to acquire Mulesoft. The deal places the value of MuleSoft at approximately $6.5 billion. Salesforce will pay a premium of 36% of the shares of MuleSoft. The deal is expected to be concluded before August this year.
“It is really a natural fit for Salesforce to own Mule. Salesforce usually helps customers move to the cloud and digitally transform their business that often starts with CRM, so having Mule helps eliminate friction,” said Wedbush Securities’ analyst, Steve Koenig.
Tax cuts cash
This is the biggest ever acquisition for the San Francisco, California-based Salesforce and is a signal that it could be a busy year ahead for software firms as they are flush with cash following the tax cuts enacted late last year enabling them not only to retain more profits but also repatriate their cash reserves held overseas. MuleSoft was started 12 years ago and is also headquartered in San Francisco.
The flagship product of MuleSoft is a platform which enables business enterprises to connect devices, data and applications. Before going public last year MuleSoft had raised approximately $259 million from financial backers who included Salesforce Ventures, Lightspeed Venture Partners, New Enterprise Associates and Sapphire Ventures.
According to 2016 figures released by research firm IDC, Salesforce has an 18% market share in the global CRM software market. Its nearest competitor is Oracle which has a global market share of 9.4%. In the deal, Salesforce was advised by Bank of America Merrill Lynch while MuleSoft was advised by Goldman Sachs.
The deal comes a little over a week since Salesforce unveiled new customer service and sales software targeting small businesses. Known as ‘Essentials’, the software is aimed at a market segment Salesforce has struggled with in the past. It is understood that small businesses found the products from Salesforce too expensive and too complex. The Salesforce products targeting small businesses are thus starter or basic versions of the company’s products for big business.
The monthly price for a subscription to Essentials is $25 for every use and these are for teams that do not exceed 10 people. This is $50 cheaper compared to the professional versions. However Essentials does not possess marketing features. Additionally there are cheaper customer relationship management softwares in the market.
With regards to products for small businesses Salesforce has also indicated that products targeting this market such as Desk.com and SalesforceIQ will be retired starting March 2020.