Salesforce ($CRM): Benioff on a "No M&A" Diet?
Marc Benioff, founder of Salesforce ($CRM) is a big man - literally, at well over six feet tall - with a big appetite for everything. Dreamforce, an annual event held in San Francisco, is one of the largest technology conferences in the world, perhaps because he does not believe in doing anything on a small scale. Since inception in 1999, Salesforce has consummated some of the boldest acquisitions (like Tableau and Mulesoft) in software history. At one point, it even deliberated buying Twitter ($TWTR). The biggest purchase ever done by Salesforce was Slack Technologies ($WORK) in early 2021, a $27.7 billion dollar transaction funded by a mix of cash and $CRM stock.
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So, on last evening's Q4 2023 earnings call, when the company announced the disbanding of its M&A committee, Wall Street was surprised. It was strongly suggested by management that Salesforce had been nudged by investors to refocus on profitability, hence the new "No M&A" diet. Below is a relevant quote from Q4 2023 transcript:

"On M&A, we are confident in our current portfolio and are focused on continued integration of current assets. Reflective of this, you have already heard from Marc that the
Board has decided to disband our M&A committee"

Do you think this "No M&A" diet will last for Marc Benioff?

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Joey Hirendernath's avatar
In my opinion it's a prudent refocusing.

Have you read the book Trailblazer? Would be great to have your thoughts.
Benjamin Tan's avatar
@joeyhirendernath I have read it - it was his second book, after Behind the Cloud. Trailblazer was written after Salesforce had already become a bona fide SaaS giant, so his tone was more sage like. In Behind the Cloud, there was still a degree of scrappiness in Benioff. Both are good reads on Salesforce and tech in general
Dave Ahern's avatar
I agree its prudent refocusing, but I wonder can they pivot away from M&A and focus on organic growth?? No dog in the hunt, but it will be fun to watch.
Benjamin Tan's avatar
@ifb_podcast definitely the right pivot for Salesforce to be making - not quite the environment to exert capital in large acquisitions, despite many more SaaS companies being on sale today. On organic growth, believe more of it will come from Europe and Asia, where their name can sell itself and digital transformation is still behind the US. Upselling and cross selling should be a major source of growth as well, given the suite of products they have. Hunkering down and bundling up!
Modern Growth Investing's avatar
thats right dont buy stuff when its dirt cheap, buy it at 40X sales, my guy buffet be so proud of DREAMFORCE
Benjamin Tan's avatar
@growthinvesting seems ironic that Salesforce is pulling back when many SaaS companies are cheaper than ever, but it is what it is - hindsight is always 20-20. But Marc Benioff has nevertheless built an incredible SaaS giant out of nothing but a vision he had for software since his $ORCL days
Joshua Simka's avatar
I see it as a kind of admission that the deals they made for Tableau, Mulesoft, Slack, etc. weren't the best? (If the M&A committee were killing it, wouldn't they keep them around?)
Benjamin Tan's avatar
@tomato I don't think they are saying if those deals were not the best, but rather it is more appropriate for them to focus on integration, rather than add more to the existing product suite. In any case, I find the whole M&A committee thing to be more optics than a real change. How difficult will it be to reconstitute an M&A committee when inorganic growth comes back into the picture? Their internal divisions to allocate capital towards acquisitions, analyze, and integrate are all still intact, as they are part of any large organizations. The committee is just a bunch of senior people giving final blessings, which are withheld for now....
Rihard Jarc's avatar
Yeah seems the $CRM M&A hunt dog has been shot down. New era for tech.
Benjamin Tan's avatar
@rihardjarc it is what the market wants, and under pressure by all the big time activist investors at $CRM
Rihard Jarc's avatar
@consumeowntech If the period is long enough the market always get's what it wants.
Nathan Worden's avatar
I wonder how much timing plays into the decision to go "No M&A" as well. 2020-2021 was a bad time to be buying anything, so I'm sure they overpaid for Slack.

I think doing less M&A is good for salesforce, but I'm not sure absolutely no M&A will be easy for them to do...
Benjamin Tan's avatar
@nathanworden Definitely some overpaying for $WORK that went towards funding Butterfield's real estate empire!

$CRM will be back doing acquisitions again - it has to for survival, innovation, and new blood. The largest companies in the world all do it to keep renewing their growth S-curves, from $KO to $AAPL. Just a question of when. Some purchases will prove out to be good, others not. Capital allocation is messy, just like for our own personal portfolio investments. Time will be the judge of how past M&A deals pan out for $CRM
Nathan Worden's avatar
@consumeowntech Really is a sage observation^
Benjamin Tan's avatar
@nathanworden haha my age is showing
Nathan Worden's avatar
@consumeowntech But its a good look 😄



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