If Salesforce ever put itself up for sale, Microsoft would be the buyer, an analyst says

REUTERS/Denis Balibouse

Chairman and Co-CEO of Salesforce Marc Benioff.

• Microsoft could perhaps one day pursue Salesforce as an acquisition target, analysts at Piper Sandler predicted.
• The deal is unlikely, however, because Salesforce is valued at nearly $168 billion - and there's no public indication the company is willing to sell.
• It's not the first time that Salesforce has come up as a potential acquisition target.
• RBC Capital Markets recently predicted Google could try to buy Salesforce to leapfrog Microsoft in the cloud.
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If Salesforce ever goes up for sale, Piper Sandler analyst Brent Bracelin predicted in a research note Microsoft would be the buyer.

Salesforce would be an attractive acquisition, according to Bracelin, because Microsoft has less than 5 percent market share of front-office applications - the market term for software that helps salespeople and service reps keep track of their customers, which is an area where Salesforce specializes.

Such a deal "would elevate Microsoft as the software-as-a-service alternative to Oracle, IBM, SAP and AWS," Bracelin wrote in the note.

Despite there being no public indication Salesforce is pursuing a sale, it's not the first time in recent memory that the company has come up as a potential acquisition target by a bigger rival. RBC Capital Markets recently predicted Google could acquire Salesforce this year to leapfrog Microsoft in the cloud market.

'Low likelihood'

Bracelin said the Microsoft deal has a "low likelihood given sheer size of potential deal and willingness to sell."

Salesforce's market cap is $167.56 billion at the time of this writing and a buyer would likely pay a premium. RBC predicted Salesforce could be valued at as much as $250 billion in an acquisition - a premium of some 70% of its market cap at the time of writing.

For perspective, Microsoft's largest acquisition was paying $26.2 billion for LinkedIn in 2016, and the company spent around $9 billion on acquisitions during the entire 2019 fiscal year. At $167 billion, Salesforce would be a record-setting buy even for Microsoft, let alone at $250 billion.

Google speculation

RBC predicted in its 2020 software outlook report that Google could acquire Salesforce to reach its goal to become the No. 2 cloud player by 2023, meaning it would have to pass Microsoft.

According to a source who spoke with Business Insider in August, Kurian told employees Google Cloud has a five-year goal to become "at least the No. 2 cloud. Observers have speculated since he took the job that Kurian could be looking to make megadeals.

"We don't see a viable organic way to get there," the RBC note said. However, acquiring Salesforce would allow Google to "instantly jump" to the No. 2 spot behind Amazon, displacing Microsoft, RBC said.

Google Cloud reported revenue for this first time this week, giving a glimpse into the size of the business. The search giant on Monday reported Google Cloud revenue of $2.6 billion for the last three months of 2019. That's less than Amazon and Microsoft, although the companies make comparisons difficult because of a disparity in the way they report cloud earnings.

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