Salesforce Acquires Own Backup for $1.9 Billion, Marking a Return to Large Acquisitions
In a move that signals a renewed focus on acquisitions, Salesforce announced on Thursday that it would pay $1.9 billion in cash for Own Co., a startup specializing in data backup solutions for cloud-based applications. The deal is expected to close in the quarter ending in January 2025, pending regulatory approval. This acquisition marks a significant shift for Salesforce after the company’s CEO, Marc Benioff, expressed a preference for organic growth over large-scale mergers and acquisitions in recent years.
Key Takeaways:
- Salesforce is acquiring Own Co. for $1.9 billion in cash.
- The acquisition signals a return to large-scale deals for Salesforce after a period of focus on organic growth.
- Own Co., formerly known as OwnBackup, specializes in data backup solutions for cloud-based applications.
- This deal comes amidst a shift in the cloud software industry, where investors are focusing more on profitability.
- The acquisition is expected to be accretive to Salesforce’s free cash flow starting in the second year after the deal closes.
A Shift in Focus: From Organic Growth to Strategic Acquisitions
The acquisition of Own Co. comes after a period of introspection for Salesforce, which faced scrutiny from activist investors for its spending on acquisitions like MuleSoft and Slack, without achieving significant growth in return. In response, the company’s board eliminated the mergers and acquisitions committee in 2023, reflecting a shift toward organic growth.
However, the $1.9 billion deal with Own Co. suggests that Salesforce is now comfortable with larger acquisitions, recognizing the value they can bring to its portfolio. This shift in strategy could be attributed to several factors, including:
- Consolidation in the Cloud Software Market: The cloud software industry has experienced a period of intense competition, leading to a wave of consolidations. Salesforce’s acquisition of Own Co. could be seen as a strategic move to strengthen its position in the market by acquiring a valuable technology with a loyal customer base.
- Focus on Profitability: The acquisition of Own Co. is expected to be accretive to Salesforce’s free cash flow, indicating that the company is focusing on profitability more than ever before.
- Strategic Fit: Own Co.’s data backup solutions align with Salesforce’s core offerings, providing valuable features for its existing customers. The acquisition is expected to enhance Salesforce’s data security capabilities and provide a competitive edge in the industry.
Own Co.: A Promising Acquisition for Salesforce
Own Co. has established a strong reputation in the data backup space, particularly for its focus on cloud-based applications. Its solutions are compatible with major platforms like Salesforce, Microsoft Dynamics, and ServiceNow, further demonstrating the company’s appeal to Salesforce. The startup’s client base includes numerous Fortune 500 companies, highlighting the value and reliability of its services.
Own Co.’s valuation has declined from $3.35 billion in 2021 to $1.9 billion in 2024, reflecting the broader market trends in the cloud software sector. Investors have become more risk-averse, demanding profitability from cloud companies, leading to a decrease in valuations for some startups and public companies alike. This trend is reflected in the recent activity by companies like Anaplan, Avalara, Coupa, Sumo Logic, and Zendesk, all of which have gone private.
Despite these market conditions, Salesforce’s acquisition of Own Co. signifies a calculated move to strengthen its position in a growing market. The company’s focus on free cash flow accretion and the value of Own Co.’s data backup solutions make this a strategically sound acquisition.
Conclusion: A Win for Salesforce and a Sign of the Times
Salesforce’s purchase of Own Co. marks a significant turning point for the company, signaling a return to larger acquisitions after a period of emphasizing organic growth. The acquisition represents a strategic move in a competitive market, highlighting the value of data backup solutions and the potential for consolidation in the cloud software industry.
As the cloud software industry continues to evolve, we can expect to see more strategic acquisitions like this one, reflecting a focus on profitability and growth in a maturing market. Salesforce’s acquisition of Own Co. sets a precedent for the future of the industry, demonstrating the importance of both organic growth and carefully-executed acquisitions in achieving sustainable success.
