By Rachael King
Months before Salesforce.com Inc. considered buying Twitter
Inc., the company was looking at more than a dozen acquisition
targets that didn't include the social-media giant, according to an
internal presentation for its board members.
The presentation came from a trove of thousands of former
Secretary of State Colin Powell's emails that was published in
September by DCLeaks, a website of self-described "hacktivists"
that releases documents from government officials and other
prominent people. Mr. Powell sits on Salesforce's board of
directors.
Titled M&A Target Review and marked "draft and
confidential," the 60-slide document identified 14 possible
targets, from design- and marketing-software maker Adobe Systems
Inc., which has a current market value of $53.7 billion, slightly
larger than Salesforce itself, to Pegasystems Inc., a vendor of
business-automation software valued at $2.3 billion.
The list included at least two companies that Salesforce has
shown interest in since May: Demandware Inc., which Salesforce in
June agreed to acquire for $2.8 billion, and LinkedIn Corp., for
which it lost a bidding war to Microsoft Corp. that same month.
The presentation provides a peek into the kind of discussions
around deal making that many big companies have, almost always in
private. It was sent to directors ahead of a board meeting on May
20, amid a particularly active M&A period for the tech industry
generally and in particular for Salesforce, which agreed to acquire
nine companies for a total of $3.8 billion between February and
September of this year.
Chief Executive Marc Benioff defended Salesforce's approach to
acquisitions after news of its interest in Twitter surfaced,
triggering pushback from his shareholders. "We look at a lot of
things and we pass on almost everything," he said at an Oct. 5
meeting with investors.
Most of the companies mentioned declined to comment. A
Pegasystems spokesperson said, "While flattering to appear on
another organization's acquisition target list, we have not had any
discussions with Salesforce on the topic of acquisition."
Mr. Powell's emails are from the same cache disclosed last month
that included the former Secretary of State's comments on major
U.S. political figures, but the emails related to his role at
Salesforce haven't previously been reported.
A spokeswoman for Mr. Powell declined to comment.
A spokeswoman for Salesforce, which sells web-based software for
sales, marketing and customer service, described the presentation
as a "landscape" of possible publicly owned targets at the time it
was created and stressed that the appearance of company names on
the list didn't mean Salesforce ever intended to buy them.
"Salesforce has a disciplined and thoughtful M&A process
where we routinely survey the industry landscape across a wide
range of companies, but acquire very few," the Salesforce
spokeswoman said.
The May document doesn't mention private companies, although
Salesforce since May has bought several: BeyondCore Inc., a
provider of data-analytics software; Quip Inc., which makes
smartphone apps for creating and editing documents; and Krux, which
provides information that helps companies improve their marketing
and advertising.
The presentation listed code names for four of the potential
targets, all the names of famous wine-making regions. Demandware,
to which about one-third of the presentation is devoted, was called
Champagne, while LinkedIn was code named Burgundy. ServiceNow Inc.,
a business software firm with a current market value around $12.4
billion, was dubbed Sonoma, and also accounted for about a third of
the presentation's slides. Tableau Software Inc., which makes data
visualization software, was listed as Tuscany.
An email to Mr. Powell dated June 2 and also published in the
DCLeaks cache shows Mr. Benioff saying that Salesforce had a better
chance of beating Microsoft than he had previously understood.
Microsoft agreed to buy LinkedIn for $196 a share in cash, or $26.2
billion in total.
"We were closer than we realized -- maybe a $105 cash plus $105
stock would have done it!" Mr. Benioff wrote, referring to
LinkedIn.
The presentation contains notes on several of the targets.
LinkedIn was listed as "in exclusivity," possibly referring to an
agreement LinkedIn struck with Microsoft on May 13, according to
LinkedIn corporate filings. While Salesforce's bid for LinkedIn
puzzled some observers, Mr. Benioff subsequently told investors
that the company considers buying "marquee monopolistic brands" as
they become available.
There are no such notes for Adobe, which given its size would be
an odd target for Salesforce. The Salesforce spokeswoman said that
Adobe appeared only as a "benchmark" to provide context for
possible targets.
The presentation also included Adobe among a list of 13 large
companies dubbed "interlopers" that appear to be potential rivals
in doing acquisitions. That list also included Microsoft and Apple
Inc.
The leaked document also appears to indicate that some of the
technology companies mentioned may have been for sale at the time.
Like other companies on the list that have since been sold, Tableau
is marked "In Play."
Some of the potential targets have since been acquired by other
companies. Marketing automation firm Marketo Inc. soon after the
presentation said that Vista Equity Partners had agreed to buy it
for $1.79 billion. Salesforce rival Oracle Corp. in June agreed to
acquire NetSuite Inc., for $9.3 billion, a deal that still awaits
approval by NetSuite shareholders.
And data-visualization firm Qlik Technologies Inc. later was
purchased by Thoma Bravo, a private-equity firm, for $3 billion.
Salesforce ultimately bought BeyondCore, a competitor of Qlik and
Tableau, for about $110 million.
Salesforce clearly viewed some of the companies listed as long
shots. Box Inc., which offers online file-sharing and collaboration
services, and Zendesk Inc., a maker of customer-service software,
appear on the list with the note "CEO has no interest." Similarly,
human resources software provider Workday Inc. is noted as "less
interested." It isn't clear which parties lacked interest.
Some of Salesforce's acquisitions took years to develop, the
emails reveal. Salesforce on Aug. 1 announced its agreement to buy
closely held Quip for $582 million in stock.
"I'm very excited about this acquisition," wrote Mr. Benioff in
a July 26 email message included in the Powell cache. "We have been
after this for three years."
Write to Rachael King at rachael.king@wsj.com
(END) Dow Jones Newswires
October 18, 2016 19:59 ET (23:59 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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