A great hipster once said “Great things in business are never done by one person. They’re done by a team of people”. Seems like SaaS CEOs are embracing Steve Job’s mantra like never before. Teaming-up with fellow enterprises to fill strategic holes via M&A deals, seems to be the strategy being adopted by market leaders like Salesforce, Microsoft, Oracle. This has been further accelerated by Trump Administration’s tax reforms, which enables firms to bring cash held overseas home at a lower rate. Microsoft and Oracle are reported to have close to $ 200 billion stashed overseas. What better way to leverage this opportunity, than add more weapon’s to one’s arsenal! My friends in Wall Street, I know you are psyched too!
2018 rolled with Salesforce acquiring Attic Labs, the startup behind decentralised database Noms. This was followed by SAP’s acquisition of CallidusCloud, a leader in Quote-to-Cash solutions, for $ 2.4 billion. Who else might tune-in? Workday merging with Salesforce, Microsoft acquiring Slack, Oracle assimilating Servicenow, among a few major ones to speculate on.
Mergers and Acquisitions: The rationale behind
Between 1985 and 2017, there has been a sharp growth in the number of mergers and acquisitions occurring across the US corporate space, with a sharp uptick in growth patterns between the 2009 and 2017. This trend in growth is due to a large variety of factors, but most importantly; corporate organizations merging and consolidating assets and business units have shown to be beneficial for both the parties involved.
Some of the key influential factors influencing M&As are:
- Acquisition of Assets: For any organization, it is vital that they keep on acquiring assets that will give them an edge over their competitors. Assets include personnel and talent, distribution networks, technology, intellectual property such as names and trademarks. The recent acquisition of CallidusCloud by SAP, is a vindication of asset purchase
- Product and Service Diversification: For any organization, it is imperative to slowly diversify its portfolio, simply due to the fact that there would be competition in the market – one of the basic tenets of a capitalistic economy. This results in slow degeneration of the market share, which gets distributed amongst the competition. The fallout of this requires organizations to plan for the long-term and ensure that they have a broad portfolio of a variety of products or services to provide to their customers. Microsoft’s decision to bring on-board Linkedin, exemplifies its focus on diversification and long-term vision
- Curtailing Competition: While this is usually a rare scenario, some organizations acquire/merge with fellow competitors to form a combined entity across the market. This is primarily done to harness the combined market share of the individual companies and create an entity which ensures the long-term survival of the parent organizations. Oracle’s acquisition of Peoplesoft, is a great example of competitors joining force
Recent SaaS M&As that made headlines
2017-18, played witness to some major M&As in the SaaS space. There were a number of M&A deals between large enterprises and start-ups – with enterprises looking to bolster their cloud-computing and consumer services offerings across a wide range of industries.
Some of the recent high-profile M&As are:
- Salesforce acquires Attic Labs: In early January this year, Salesforce acquired Attic Labs, the creator of Noms, an open-source decentralized database which lets users replicate data and edit it on multiple systems – with the ability to sync all of the distributed data together. It is expected that the Noms will work with Quip, the document collaboration platform acquired by Salesforce in 2016. Thus, Salesforce looks to enhance Quip’s capabilities and establish itself as a market leader in the collaborate at work market
- SAP Acquires CallidusCloud: SAP acquired CallidusCloud for a whooping $ 2.4 billion in late January this year. The California-based company is best known for its cloud platform offerings for sales effectiveness and automation platforms. CallidusCloud is known for its suite of applications that can identify appropriate leads, help organizations manage territory and quotas, as well as providing its customers a plethora of automation tools for proposal generation, sales personnel management, and streamlined sales compensation tools. The deal allows CallidusCloud to leverage the market expertise and broad client base across a wide variety of industries that SAP has built over the years. With the billion dollar acquisition, SAP gains direct access to the “Lead to Money” space; giving the German giant some of the pivotal tools to compete head-on with the likes of Salesforce, Microsoft, Oracle in the CRM space
- Oracle Acquires Wercker: Oracle, the database giant acquired Wercker, a Dutch software company that specializes in continuous delivery platforms for rapid application development and deployment to third-party cloud computing services, in spring last year. With the buy, Oracle intends to democratize developer ammunition for cloud
- Intuit Acquires TSheets: In winter last year, Intuit, the Mountain View-based financial software company best known for Turbo Tax and QuickBooks, acquired Idaho-based TSheets. The deal is expected to be valued at around $340 million. TSheets is a time-tracking app for employees, which allows them to clock their shifts using their smartphones – and lets managers schedule employee shifts in real time. The deal gives Intuit a huge benefit in their product offerings, allowing them to shift from purely financial software solutions to employee management solutions – one of the most anticipated automated jobs by 2020
Brace yourselves, it just got started!
Will 2018 play host to a colossal M&A, comparable to Dell’s acquisition of EMC or Linkedin’s buy by Microsoft? Will Salesforce get back to its buying spree? Will giants – Apple, Google make wildcard entries? While bottlenecks – antitrust concerns, investors’ approval etc do exist, SaaS leaders are expected to indulge in ravenous shopping sprees.
“Why compete, when you can team-up!” Steve Jobs, do you agree? Btw, Happy Birthday to you!