The announcement by cloud giant Salesforce.com Inc. (CRM) to purchase data analytics company Tableau Software Inc. (DATA) for about $15.7 billion is likely to spur an arms race among Microsoft Corp. (MSFT), International Business Machines Corp. (IBM) and other major players as they seek to protect their market shares. Citigroup, in a recent note to clients, highlighted the most likely new takeover targets within the cloud, analytics and software businesses.
Citigroup’s list by market cap, according to Barron’s:
- Alteryx Inc. (AYX): $6.89 billion
- Talend S.A. (TLND): $1.23 billion
- MongoDB Inc. (MDB): $9.13 billion
- Elastic N.V. (ESTC): $5.33 billion
- Cloudera Inc. (CLDR): $1.45 billion
- Microstrategy Inc. (MSTR): $1.36 billion
- Teradata Corp. (TDC): $4.26 billion
Source: Citigroup, Barron's; Investopedia.
What it Means for Investors
The acquisition of Tableau by Salesforce is the fourth-largest technology deal globally this year and demonstrates Salesforce’s intent to defend its current leading position in the market for customer relationship management software. Both Microsoft and Adobe have begun to encroach on what Saleforce sees as its main turf in recent years. Salesforce also purchased web-based service MuleSoft Inc. for $6.5 billion last year and e-commerce platform Demandware Inc. for $2.8 billion in 2016.
“Microsoft is making gains overall in the market, and this is a way for them to strike back,” Wedbush Securities analyst Steve Koenig told the Wall Street Journal. “It extends their rivalry from [customer-relationship management] to the heart of the analytics market.”
The Salesforce–Tableau deal is just the latest sign that the software and cloud-computing giants are looking to extend and defend their market shares through M&A deals. Google acquired Looker for $2.6 billion last week, and Microsoft is shopping around for a match to bolster its cloud business Azure. IBM purchased Red Hat for $34 billion and SAP bought Qualtrics for $8 billion last year.
Computer software firm Alteryx could be one of the next targets, being a strong strategic match for both IBM and Microsoft, according to Citigroup. The company could provide developers and end users that might attract people to IBM’s Watson AI platform, or it could create synergies with Microsoft’s Azure cloud-computing service.
Cloud and data-integration firm Talend is another strong candidate for an IBM acquisition, as its big-data and cloud focus would supplement IBM’s legacy integration business. In that case, the firm would also be a strong fit for Oracle.
Information technology and data analysis firm Elastic would likely best fit with Microsoft, according to Citi’s researchers. Elastic’s strengths could align well with Github’s and Microsoft’s open-source business, and its logging and search capabilities would be a nice supplement to Azure.
As the cloud-computing giants continue to battle to defend and extend their turf, expect shares of potential targets to get a boost, especially considering the hefty 42% premium Salesforce will be paying above Tableau’s market value in the acquisition.