Similarly, this new deal with Informatica also highlights Salesforce’s foresight in understanding the potential in the AI market and its eagerness to cash in on this bandwagon.
Cloud software company Salesforce announced on Tuesday that it would buy Informatica, a data management platform, for $8 billion to increase its competitiveness in the artificial intelligence (AI) market. After a break of several years, Salesforce, which had been on the receiving end of repeated scrutiny by activist investors pushing for better profitability, has re-entered the mergers and acquisitions (M&A) market with this new venture.
The Wall Street Journal had reported earlier this week that after Salesforce walked away from a bid to acquire Informatica last year, negotiations were renewed in April of this year. It was around the same time that a number of interested buyers, like private equity firms and other companies, had also approached the data company.
Informatica was founded in 1993 and provides subscription-based data management services over a cloud network and also automates tasks for over 5,000 active customers. This data management firm boasts a rich clientele, including mega-brands like Deloitte and Unilever.
While Salesforce has a reputation for acquiring its smaller rivals, it came under fire around 2023, when activist investors like ValueAct Capital and Elliott Management criticised the company’s strategies and urged management reform. Salesforce duly implemented cost-cutting, increased share buybacks and disbanded the M&A board committee.
Reuters reported that Thoma Bravo and Cloud Software Group were part of the five interested buyers of the asset. For Salesforce, the acquisition of Informatica is its biggest deal since it bought workplace messaging app Slack Technologies Inc. in a $27.7 billion deal in 2021. With the timely purchase of Slack, Salesforce showed great business acumen, having predicted a growing preference for remote work, particularly at the height of the pandemic.
Similarly, this new deal with Informatica also highlights the company’s foresight in understanding the potential in the AI market and its eagerness to cash in on this bandwagon. For Salesforce, this venture will augment its data management tools as it explores more AI-powered products. The software maker can also exercise more control over how business data is used and managed, which is important for it now as it seeks to further embed generative AI into its products.
According to Salesforce CEO Marc Benioff, this partnership has the potential to create the most complete, agent-ready data platform in the industry, and such a deal will strengthen the company’s position in the $150 billion-plus data enterprise market.
The software company has been offering AI agents, programs that can handle routine work without the need for human supervision, and it has also been offered to businesses for recruitment and customer services. In December 2024, it was reported that Salesforce’s AI-generated platform for creating virtual representatives, known as ‘Agentforce’ has closed more than 1,000 paid deals.
Benioff had previously expressed his belief that ‘digital labour’ is set to augment humans and add to growth in the economy. He also revealed that Salesforce would soon introduce a ‘robot force partner program’ which could connect real-world and virtual machines.
On Tuesday, Informatica shares surged 5.8% in afternoon trading at $23.86, and Salesforce was up 1.78%. Salesforce is reportedly paying Informatica $25 per share, a premium of about 30% to Informatica’s closing price on May 22, the day before news of the acquisition broke.
The business software giant hopes to finalise the deal early on in the next fiscal year, starting February, with both cash and new debt, and it will have to give the deal two years after closing to boost its operating margin. Market analysts believe that this acquisition could help Salesforce catch up with its fellow software rivals, as data management software is usually sold as part of a toolkit.
Salesforce is known for being a calculated dealmaker, having bought data analytics firm Tableau Software in 2019 for $15.7 billion in stock and Slack in 2021. This new deal with Informatica is also one that the software company knows it needs to expand its range of operations. This new acquisition also raises questions of whether Salesforce is finally out of its slump and will soon announce an array of partnerships and acquisitions, as it did before it drew the ire of activist investors.