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Salesforce Reportedly in Talks to Buy SteelBrick for $600M

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Enhancing capabilities by acquiring start-ups is nothing new for salesforce.com, Inc.CRM . If media reports are to be believed, the world's leading CRM platform provider is going to announce another take over soon, which is believed to be its largest this year.

Citing sources familiar with the matter, The Information yesterday reported that Salesforce is in talks to acquire the San Mateo-based sales software start-up for $600 million. The company, however, has declined to comment on the news.

Founded in 2009, SteelBrick offers quote-to-cash technology which simplifies the sales process of the companies by automatically generating quotes, contract and billing, thereby making it easier for sales people to come up with the final proposal and prices for potential customers.

Since its inception, the company has raised more than $77 million. In October, it raised $48 million and Salesforce was one of the investors. The company was estimated to be worth $250 million in October.

Salesforce has always been active in acquiring businesses which have huge growth potential. The company's acquisitions over the past one year have been mainly focused on enhancing its marketing and analytics businesses. However, the SteelBrick buyout will give a boost to its Sales Cloud business which is witnessing a slow growth rate.

It should also be noted that SteelBrick has a competitive advantage over the likes of BigMachines, owned by Oracle Corp. ORCL , as the company mostly deals with small- and medium-size enterprises. On the other hand, BigMachines' software is too expensive for this category.

Further, citing a report from IT research firm Gartner Inc. IT , Business Insider revealed that the overall quote-to-cash market would cross the $41 billion mark by 2018. Therefore, we believe that this acquisition is will help Salesforce grab significant market traction in this space.

Investments in start-ups have always been one of the key growth strategies of Salesforce. Over the past few years, the company has invested in several start-ups, through acquisitions as well as partnerships. According to a report by TechCrunch, since 2009, Salesforce Ventures, the company's investment arm, has invested about $500 million in more than 150 enterprise start-ups.

Further, it should be noted that this October, Salesforce Ventures announced its plan to invest $100 million specifically in European start-ups with the goal of fueling cloud innovation and picking up a few customers in the process.

We believe that Salesforce's sustained focus on expanding its business through strategic takeovers and investments will drive growth over the long term.

Salesforce currently carries a Zacks Rank #2 (Buy). Another stock in the broader technology sector is Aspen Technology Inc. AZPN which sports a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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