Salesforce.com announced plans to acquire ExactTarget for $2.5 billion in what represents the biggest acquisition in Salesforce’s history. The deal comes less than 12 months after Salesforce acquired Buddy Media for $680 million. Under the terms of the deal, Salesforce will pay $33.75 a share, or 53% more than the ExactTarget closing share price on Monday of $22.10. Salesforce noted that the acquisition is expected to increase fiscal 2014 revenue by $120 or $125 million, and correspondingly reduce adjusted earnings by 16 cents per share.
ExactTarget is used by over 6000 companies to manage email marketing, text messages and social media camapagins, including the likes of Nike, Coca Cola and Gap. Its acquisition enables Salesforce to offer customers a more comprehensive marketing platform in contrast to Buddy Media and Radian 6, another of its recent acquisitions. Buddy Media specializes in social media marketing and Radian 6 focuses on understanding what is said in social media platforms. CEO Marc Benioff commented on the magnitude of the deal’s size and the broad scope of ExactTarget’s product line by noting:
We can’t just keep making these small acquisitions. That strategy was just taking honestly too long. We needed to do something of consequence and we needed to do something strategic and we needed to do something now.
Shares of similar companies within the email automation and marketing automation space rose upon news of the acquisition, with Responsys closing at $10.53 a share, up 8.78%. Constant Contact shares closed at 15.76 a share, up 5.14%. Privately held Act-On, an integrated marketing vendor that delivers a comprehensive automated marketing solution featuring SEO, integrated Google Analytics support and analysis of search histories, reacted to the news of the acquisition with the following remarks from Act-On CEO Raghu Raghavan:
Marketing software is undeniably one of the hottest markets right now and can be attributed in part to the fact that more CMOs are purchasing marketing-related technology and services from their own capital and expense budgets…All of the recent activity over the past year in the marketing automation space with Oracle’s acquisition of Eloqua, and then last month’s news of Marketo’s IPO are validation of this red hot space that Act-On is operating in. To think that only 5% of the market has been penetrated leaves green fields for marketing software vendors to innovate, expand and grow. This is only the beginning of a long and prosperous road for marketing automation.
The key point Raghavan makes here is that Chief Marketing Officers are increasingly purchasing technology for marketing from their own budgets as opposed to IT, with the result being that the marketing automation is space is exploding as CMOs experiment with different vendors and types of analytics. In December 2012, for example, Oracle acquired Eloqua for $871 million, or $23.50 per share. According to The Wall Street Journal, Salesforce paid 5.5 times the 2014 forecasted revenue price of ExactTarget, less than the 6.1 multiple of forward revenue that Oracle paid for Eloqua. Shares of ExactTarget closed up 52.4% on Tuesday at $33.69 a share, whereas shares of Salesforce declined 7.89% to $37.80. Salesforce CEO Marc Benioff celebrated the finalization of the acquisition but noted that the company was likely to take a “vacation from M&A for anywhere between probably 12 and 18 months.”