Salesforce to buy Informatica for $8 billion to bolster AI data tools
The cloud-software giant is returning to big-ticket M&A after years on the sidelines, driven by scrutiny from activist investors pressing for better profitability. Last year it shelved deal talks with Informatica after the companies failed to agree on deal terms.
The negotiations picked up steam again in early April, when a handful of potential buyers, including private equity firms and other companies, approached Informatica around the same time, according to a person familiar with the sale process.
Thoma Bravo and Cloud Software Group were part of the five interested buyers of the asset, that person and another person familiar with the process said. Thoma Bravo declined to comment, while Cloud Software Group was not immediately available to comment. Buying Informatica, in its biggest deal since its nearly $28 billion acquisition of Slack Technologies in 2021, would help Salesforce expand its data management tools as it doubles down on AI-powered products. The deal would also allow Salesforce to tighten control over how business data is managed and used, an essential step as it races to embed generative AI deeper into its products.
"Salesforce and Informatica will create the most complete, agent-ready data platform in the industry," said Salesforce CEO Marc Benioff, adding the deal will strengthen its position in the $150 billion-plus data enterprise market. The company has been offering AI agents - programs that can handle routine work without human supervision - to businesses for recruiting and customer service. It has closed more than 1,000 paid deals for "Agentforce," its platform for creating AI-powered virtual representatives.
Salesforce is paying $25 for each share of Informatica, a premium of about 30% to Informatica's closing price on May 22, the day before news of renewed talks emerged.
Informatica shares were up 5.8% in afternoon trading at $23.86, while Salesforce was up 1.78%.
Salesforce expects to close the deal in early next fiscal year starting February through a mix of cash and new debt. The deal is expected to boost its operating margin from the second year after closing.
Scotiabank analysts said the move could help Salesforce catch-up with software rivals as "data management software is now most often sold as part of mega-vendor tool kits". The business software company has been a prolific dealmaker, buying data analytics firm Tableau Software in 2019 for $15.7 billion in stock, and Slack in 2021 in its biggest deal.
Those deals drew scrutiny in 2023 when activist investors, including ValueAct Capital and Elliott Management, pressed for changes to improve profitability.
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It also engaged with smaller system integrators who could do business with India's vast swathe of small companies. In addition, Salesforce organized developer conferences, incentivised star performers and created a startup ecosystem by partnering with 300 startups at the last count. These are essentially startups that couldn't afford Salesforce but wanted top notch CRM software. Salesforce doesn't invest capital but gives away its software. In the process, it gets to develop more use cases and work with smaller businesses. 'Our count of the extended ecosystem—the number of people Salesforce touches—is now in the millions in India," says Sanket Atal, managing director and head of India operations at Salesforce. While Atal heads the India operations, which includes all offices and development centres, Mankiran Chowbey, who Bhattacharya had hired from SAP India in 2022, recently took over as the managing director of domestic sales. In short, Bhattacharya's second innings had a good run. She has grown the business, expanded the organization, and bought in the next line of managers. Not the kind to take a backseat, it will be interesting to watch her plans for South Asia, her third innings. The next couple of years will be crucial. Salesforce is much larger now in India. Keeping the high growth rate going won't be easy. Market watchers also say that the new role could be more demanding. India and the Indian market was her backyard; here, she was widely recognised and celebrated—advantages she won't carry forward in South Asia. Bigger roles bring bigger challenges.
