Here’s The Reason Behind Salesforce.com’s Acquisition of SteelBrick

+7.50%
Upside
301
Market
323
Trefis
CRM: Salesforce logo
CRM
Salesforce

Leading Customer Relationship Management (CRM) cloud software vendor Salesforce.com (NYSE:CRM) recently announced that it has entered into an agreement to acquire quote-to-cash vendor Steelbrick for $360 million, including $60 million in cash. [1] The acquisition adds yet another link in the chain of CRM services that Salesforce provides via its Sales Cloud. Steelbrick’s existing revenue is not publicly available so it is unclear how much incremental revenues Salesforce will immediately gain from the acquisition. Nevertheless, the purchase doubtlessly adds additional firepower to Salesforce’s industry-leading Sales Cloud, which has been losing ground to the Service Cloud and Marketing Cloud in recent quarters. (Read: Here’s The Reason Behind Salesforce’s Unabated Growth)

Steelbrick sells software for automating quote-to-cash tasks, including Configure Price Quote (CPQ). It includes the selection and pricing of all the features, components and add-ons that go into a proposal to the buyer. [2] So far, Salesforce did not provide this service in-house but left it to partners such as Apttus. [3] The acquisition will now add to Salesforce’s already substantial firepower in the CRM space and will allow it to offer quote-to-cash and CPQ capability in-house. Notably, the Steelbrick CPQ was built and delivered natively via the Salesforce1 Platform, which will significantly speed up Steelbrick’s integration into the Salesforce environment. Note, too, Salesforce Ventures (the company’s venture capital arm) particpated in earlier funding rounds for this start-up.

Salesforce has a history of acquiring companies which offer capabilities that Salesforce formerly relegated to partners. Its past major acquisitions like those of RelateIQ and ExactTarget follow exactly the same pattern of adding capabilities that were hitherto not provided by Salesforce directly. Thus, it is highly possible that Salesforce may repackage Steelbrick’s services into its Sales Cloud in its quest to becoming a one-stop shop for all things CRM. The acquisition may not provide a meaningful boost to the Sales Cloud’s dwindling revenue growth due to its massive scale. However, the value of adding a new service to the Sales Cloud is likely to be greater than the sum of its parts, thereby resulting in significant synergies.

Relevant Articles
  1. Up 69% In The Last Twelve Months, What To Expect From Salesforce Stock?
  2. Up 74% Since The Beginning of 2023, Will Salesforce Stock Continue Its Strong Rally?
  3. Salesforce Stock Is Undervalued
  4. Salesforce Stock To Edge Past The Consensus In Q1
  5. Salesforce Stock Is Trading Below Its Fair Value
  6. What To Expect From Salesforce Stock In Q4?

Our price estimate of $65 for Salesforce.com is about 20% lower than its current market price.

See our complete analysis for Salesforce.com here

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

More Trefis Research

Notes:
  1. Salesforce Buys SteelBrick for $300 Million, The Wall Street Journal, December 23, 2015 []
  2. CRM swallows CPQ as Salesforce buys Steelbrick, Diginomica, December 28, 2015 []
  3. Last-minute Christmas shopping for Salesforce and Oracle, Diginomica, December 24, 2015 []