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Bloomberg
a day ago
- Business
- Bloomberg
A Decade On, Has Japan's Corporate Revolution Worked Too Well?
Japan wanted change in its corporate sector. It got it — for better or worse. A decade on from the introduction of the country's first Corporate Governance Code, there's so much M&A activity in Tokyo these days that it's tough to even keep track. From private equity to activist investors to consolidation among companies fearful they'll be targeted next, no acquisition seems beyond the pale.
Globe and Mail
30-05-2025
- Business
- Globe and Mail
Salesforce's (CRM) $8Bn Informatica Acquisition Shakes Up AI Race
The market response to Salesforce's (CRM) recent $8 billion acquisition of Informatica is mixed. This move marks Salesforce's latest effort to strengthen its AI capabilities, particularly within its Agentforce platform. However, the company has faced criticism over past large acquisitions, like Slack, that didn't fully meet expectations. Reflecting this cautious sentiment, the stock's reaction to the announcement has been lukewarm at best. Confident Investing Starts Here: All in all, there are upsides and downsides to deals this size, leaving me cautiously optimistic on Salesforce's most recent splurge. Salesforce's Acquisition Strategy Under the Microscope For those unfamiliar, Salesforce is a leader in customer relationship management (CRM) software. The company has a track record of high-profile acquisitions, including Tableau for $15.7 billion in 2019, MuleSoft for $6.5 billion, and Own Company for $1.9 billion in 2024. In 2023, activist investors criticized Salesforce's aggressive acquisition strategy, urging the company to focus more on profitability and scale back on large deals. Since then, Salesforce has moderated its M&A activity, now targeting only acquisitions that align closely with its strategic goals. An Unlikely Match Made in AI Heaven Salesforce's acquisition of Informatica was initially unexpected, especially after the deal collapsed in April 2024 when the price was pegged at $11 billion. However, the two parties eventually reached an agreement, leading to the current deal. This acquisition comes as Salesforce's growth has slowed, shifting from years of double-digit gains to more modest single-digit increases. Informatica is widely regarded as a leader in AI-powered enterprise cloud data management, serving over 5,000 clients across numerous countries. This acquisition should help Salesforce strengthen its AI capabilities, particularly in automating and improving data preparation, quality, and governance. Salesforce is no stranger to AI—its Agentforce platform uses generative AI to create autonomous agents that handle complex tasks such as coaching sales reps and automating quoting processes without human involvement. Integration Challenges and Potential Pitfalls Make no mistake, this acquisition also has a clear financial motive: to reignite growth, a common playbook for large tech companies facing slowing organic expansion. However, this approach doesn't always yield the desired results. Informatica was a substantial company on its own, and merging two large organizations is a complex, time-consuming process that can take years. Consider Salesforce's previous integration challenges, like with Slack's ambitious 'Digital HQ' vision. Additionally, Informatica's appeal partly stemmed from its neutrality—it was platform-agnostic across various multi-cloud and multi-vendor environments. Customers might resist if Informatica is perceived merely as a gateway into the Salesforce ecosystem. Cultural clashes are another potential hurdle, something Salesforce knows well from past experiences. Salesforce Boosts Cash Firepower One thing is certain: Salesforce has plenty of cash to deploy. The company generated $13.1 billion in operating cash flow in fiscal year 2025 and projects $14.5 billion for fiscal year 2026. As the following chart shows, Salesforce has clearly made cash generation a top priority in recent years. Is Salesforce a Buy, Sell, or Hold? On Wall Street, CRM sports a Moderate Buy consensus rating based on 27 Buy, eight Hold, and two Sell ratings in the past three months. CRM's average price target of $349.09 implies an upside potential of 26.5%. Following Salesforce's Informatica acquisition, Bank of America Securities analyst Bradley Sills issued a Buy rating on CRM with a price target of $350. He believes the reasonably priced deal will enhance Salesforce's data capabilities. Regarding near-term financial implications, the analyst believes 'the acquisition is anticipated to be accretive to Salesforce's non-GAAP operating margin and free cash flow starting in the second year post-closing.' However, not everyone on Wall Street is as confident in the deal as Sills. DA Davidson expressed caution, noting 'Informatica's suboptimal execution track record and legacy technology offerings.' Cautious Optimism for Salesforce's Future The market's cautious reaction to Salesforce's latest acquisition is understandable, but a closer look shows the deal makes strong strategic and financial sense. The Informatica purchase accelerates Salesforce's AI capabilities and strengthens its position against other tech giants. It's also expected to improve operating margins and enhance growth prospects. That said, there are key challenges to monitor in the coming years. Salesforce must successfully integrate Informatica while preserving its reputation as a platform-agnostic data provider. Additionally, blending the two companies' cultures will be crucial to sustaining innovation, a reality often overlooked by investors but vital in business. While relying on M&A to drive growth isn't always ideal, it's sometimes necessary. To borrow a baseball analogy, Salesforce may look great 'on paper,' but we won't truly know how this deal plays out until the team has spent some time 'on the field.'
