Salesforce investors are getting heartburn trying to swallow the rich $6.5 billion MuleSoft deal

• Salesforce plans to acquire MuleSoft for $6.5 billion but analysts aren't sure that it's worth it.
• Analysts are concerned that Salesforce won't be able to use MuleSoft's on-premise licensing product - a core part of its business - and that customers might not respond well to the acquisition.
• Others think the price comes down to other buyers, since MuleSoft is one of a kind in the market.

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Saleforce's planned acquisition of MuleSoft, announced Tuesday, has been a hit with Wall Street analysts - except when it comes to the steep, $6.5 billion price tag.

MuleSoft, which trades publicly, was valued around $4.3 billion and $33.04 per share when markets opened on Tuesday. Salesforce's offer values the company at $36 per share, plus equity in Salesforce.

All together this deal is worth about $44.89 per share, for a 36% premium on MuleSoft's stock value, according to Terry Tillman, an analyst at Suntrust Robinson Humphrey.

Scott Berg at Needham suggested it could be "the most expensive transaction ever of a public software company," and Tillman highlighted that it's Salesforce's largest acquisition to date, far ahead of its $2.8 billion acquisition of Demandware in 2016.

MuleSoft provides tools to help companies integrate the various pieces of software they use. Since the deal was announced earlier this week, Salesforce's shares have slid more than 5%.

The deal is expected to close in July. It's worth noting that Salesforce's investors have a history of agitating against deals they don't like. Salesforce CEO Marc Benioff acknowledged in 2016 that he backed away from deal talks with Twitter after investors protested. That seems unlikely to happen with MuleSoft, given that the transaction has already been approved by both companies' boards, but the logic of a Salesforce-MuleSoft combination is raising questions among some analysts.

Salesforce could drop MuleSoft's on-premise product entirely

Berg wrote that while his team understands Salesforce's interest in MuleSoft's technology, he believes "the purchase price to be too rich," and questions what Salesforce - which exclusively sells cloud-based products - will do with MuleSoft's on-premise license offering, which makes up a substantial portion of the company's total revenue.

Berg told Business Insider than he expects Salesforce to stop selling the on-premise product entirely, which would force customers to either stop doing business with MuleSoft or switch to the cloud product.

Keith Weiss at Morgan Stanley also questioned whether Salesforce will be able to get a return on its investment.

Weiss shared the same concerns with Berg over what Salesforce will do with MuleSoft's on-premise product offerings but said that "the most notable risk post acquisition likely revolves around customer perception of MuleSoft losing it's 'neutrality' as an integration platform."

Salesforce is a competitive company, including with some of MuleSoft's partners like Microsoft and SAP, and Weiss thinks this may scare away some customers, despite management's assurances during its announcement call that MuleSoft will remain neutral.

Analysts think the high price came down to other potential buyers

Tillman was more confident that Salesforce will make up for the price with by enhancing its customer experience, while accelerating its path to hitting more than $20 billion in annual revenue. The price, Tillman wrote, likely reflects MuleSoft's desirability to other acquisitive companies.

"We assume based on the deal valuation there was likely meaningful interest by other parties. It's definitely a high valuation level but we believe Salesforce can drive significant revenue synergies and help the MuleSoft business achieve $1 billion in revenue much faster than it could on a standalone basis," Tillman said in a note Wednesday.

Raimo Lenschow at Barclays seconded the idea that the $6.5 billion figure came down to competition for MuleSoft.

"We believe the healthy price is driven by the scarcity value of MuleSoft as it is the only real next-gen integration vendor in the market. Hence, we view the announced acquisition as a positive for the name," Lenschow wrote.