Salesforce (CRM, Financial) and Informatica (INFA, Financial) have decided to terminate their acquisition discussions due to price disagreements, as reported by the Wall Street Journal. Initially, CRM aimed to acquire INFA, a move that has since led to a decrease in their stock values by 8% and 9% respectively since the news broke on April 15.
CRM investors breathed a sigh of relief upon hearing the news, given the company's history of expensive acquisitions, such as the $28 billion purchase of Slack Technologies in 2021. The current economic and geopolitical climate made another costly acquisition seem even riskier. INFA shareholders, on the other hand, were not in favor of the deal from the start, especially since CRM proposed a purchase price below INFA's trading value in early April. This proposal, however, temporarily protected INFA from a steep decline in stock price amidst a broader tech sell-off.
INFA announced it is not currently in talks for acquisition, alongside an optimistic Q1 guidance update, hoping to mitigate the impact of the collapsed deal discussions. Despite this, INFA's stock had surged by 35% leading up to April 12, driven by its potential as an AI investment, which initially attracted CRM. However, with a forward P/E ratio over 32x and an expected top-line growth of about 8% year-over-year, the updated guidance might not meet investor expectations.
For CRM, acquiring INFA for around $10 billion in a deal that could dilute earnings was not seen as beneficial. Instead, investors are looking for CRM to enhance its profitability and earnings growth, especially in a challenging business environment where customer spending is more cautious.
