As of now, Salesforce has valued itself way above what Microsoft offered to overtake it; hence the deal between the two stands unconcluded. Price has played foul in the said deal, which had almost reached its final stage.
Microsoft Corporation (MSFT, Financial) offered $55 billion to buy out Salesforce.com (CRM, Financial), which fell behind the latter’s demand of $70 billion. The deal, which was in its final stages of talks, was left unconcluded with no chances of being resumed in the near future. While the shares of Microsoft fell 1%, a rise of 4% was seen in the shares of Salesforce.
Why the deal fell apart
Founded in 1975, Microsoft is an American multinational technology company that develops, manufactures, licenses, and supports and sells computer software, consumer electronics and personal computers and services. Analysts had found Salesforce.com to be the perfect suitor for expansion of businesses of Microsoft as the cloud computing company was popular for its customer relationship management (CRM, Financial) product- a software that helps companies organize as well as track leads and sales calls.
The fallout of the deal was first reported by CNBC mentioning that after reaching a significant phase of the takeover, Chief Executive Marc Benioff of Salesforce.com Inc. turned down the offer while demanding for $70 billion as the deal amount. Apart from Microsoft, Oracle Corp. (ORCL, Financial), and Amazon.com Inc. (AMZN, Financial) were also considered as the probable suitors for Salesforce buyout. As per the CEO of Microsoft Satya Nadella, the deal had become a little larger which might generate aftermaths for Microsoft, reason why he abandoned the deal. Though the analysts are still of the view that had association of Salesforce with Microsoft would have been ideal considering the former’s leadership in CRM Market, which is worth almost $23 billion annually as per tech research firm Gartner (IT, Financial).
Had the deal got completed, Microsoft had plans to offer a major part of its $95 billion cash available to pay for Salesforce, along with 5.7% stake of Salesforce owned by Benioff into those of Microsoft with other shareholders being paid in cash. For now, the negotiations stand closed as no further offers have been made by Microsoft. Though this was not the first deal made by Microsoft, but had it gotten complete, it would have been the largest so far by Microsoft. Some of the big purchases by Microsoft include takeover of Skype in 2011 for $8.5 billion and buyout of Nokia (NOK, Financial) Devices unit in 2013 at $7.2 billion.
Current Market scenario
The undergoing deal came into light last month when speculations were made on the possible buyer for Salesforce from among Microsoft, Oracle, IBM (IBM, Financial), Amazon and SAP (SAP, Financial). Salesforce could have contributed significantly to Microsoft as it provided services online without any requirement for software directly installed on PC, thus helping companies like Microsoft who want to make their mark in the cloud computing market. As per a report, Microsoft is not looking out for continuance of the deal. Even SAP has declined any intentions to buyout Salesforce and in fact claimed that as of now, there is no buyer in the market for Salesforce.
Reports on takeover of Salesforce had sent its profits up for the first time in seven quarters at the time when the company was being valued at $48.4 billion. In the afternoon trading, shares of Salesforce had gone up 1.7% at $74.16, while Microsoft shares went down 1% at $46.93.
