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Valeant Pharmaceuticals Intl Inc (VRX), salesforce.com, inc. (CRM): Two Huge Deals as M&A Accelerates

salesforce.com, inc. (NYSE:CRM)

Earlier this week, leading SaaS firm salesforce.com, inc. (NYSE:CRM) made headlines acquiring cloud marketing platform ExactTarget Inc (NYSE:ET) for $2.5 billion in cash ($33.75/share).

The move comes as salesforce.com, inc. (NYSE:CRM) hopes to round out its product offerings, and adding a company largely known for its email marketing platform helps the firm move towards this goal. CEO Marc Benioff, excited about this new acquisition, explained that the landscape is changing, saying on the deal’s conference call:

“There is no doubt our whole industry is changing, and the opportunity to create solutions in sales and service and marketing that are unified, that are mobile, that are social, that are in the cloud, that this combination of these two companies positions us in a way as never before.”

Prior to the deal, salesforce.com, inc. (NYSE:CRM)’s marketing platform was known to be relatively weak. While the firm features social media monitoring software Buddy Media, which also fetched several hundreds of millions of dollars, the company lacked an email service, which we believe is critical to any company’s marketing strategy. Unlike social media, where we believe the impact is still largely unquantifiable, e-mail marketing delivers strong data and analytical insights for businesses. In Benioff’s eyes, the deal rounds-out the product lineup and adds value to the firm’s existing offering.

Of course, with any acquisition, price is paramount. The firm paid a premium of about 47% over the prior day’s closing price, and 5.5x consensus FY 2014 sales. Additionally, ExactTarget Inc (NYSE:ET) hasn’t been profitable for several years, and its acquisition will weigh on results. Let’s not forget the company used virtually all of its cash to consummate the deal. Undoubtedly, the deal wasn’t cheap, and we aren’t sure if it will be able to live up to the bold assumptions embedded in the forecast.

Overall, we’re not huge fans of the deal, nor are we at all interested in salesforce.com, inc. (NYSE:CRM)’s stock at this time. With ExactTarget Inc (NYSE:ET) off the market, other automated email services like ConstantContact (CTCT) and Responsys (MKTG) could be acquisition targets for other cloud marketing competitors like IBM and SAP.

The article 2 Huge Deals as M&A Accelerates originally appeared on Fool.com and is written by RJ Towner.

RJ Towner owns shares of Valeant. The Motley Fool recommends Salesforce.com. RJ is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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