Salesforce, Informatica end acquisition talks: WSJ

Shares of Salesforce (CRM) are trading higher on Monday following a Wall Street Journal report stating the company has cooled talks to acquire Informatica (INFA) after failing to come to an agreement on deal terms. Informatica has since announced that they are currently not engaged in any acquisition talks, ahead of the company's earnings report next week.

Yahoo Finance's Brad Smith and Seana Smith break down the details.

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This post was written by Angel Smith

Video transcript

BRAD SMITH: Salesforce shares rising higher after the company's talks to buy Informatica cool after reportedly struggling to agree on deal terms, according to the Wall Street Journal. Informatica announcing on the back of this report that it is not currently engaged in any acquisition talks.

Shares of Salesforce moving higher. Informatica last I checked here, the company does report earnings May 1st. So next week, we're going to be hearing even more so about what the vision, the future looks like for this company SANS and Acquisition.

SEANA SMITH: Yeah, exactly. And we did see Informatica shares, at least initially on the heels of that first report coming out from the journal earlier this month, right, around April 11th, April 12th, I believe. We did see that move to the upside here for Informatica with shares touching the highest that they have reached now in quite some time. So we are seeing a bit of a pullback here from those elevated levels, something you would expect, obviously following an update like this.

But again, Informatica saying that there is no truth, at least right now, to the fact that they are in discussions to potentially be acquired. I also think it's interesting to talk about what this means here for Salesforce, because we did see-- following that initial report that I was just talking about, we did see Salesforce shares under pressure. Because if Salesforce had been pursuing Informatica, would have been a bit of a reversal from some of that restraint that they have shown here in recent quarters?

They have certainly readjusted their potential acquisition plans going forward. They weren't so much focused on M&A anymore. They were focused on profitability, something that many of activist investors have been pushing for in the street, really liking that shift. So any sort of update and the fact that they were going to be pursuing Informatica, that then would have been a shift to the old regime and how Salesforce have been approaching business deals over the last several years.

So again, we're seeing some relief on the street. The fact that Salesforce, at least for now, seems to be remaining disciplined and focused on profitability, not so much those larger acquisitions. And as a result, you're looking at shares up just about 2 and 1/2% today.

BRAD SMITH: Yeah. Informatica has a market value, a market cap of about $9 billion, so just shy of $10 billion there. You think about what this deal, if it had gone through and the type of premium that Salesforce may have been pressed to slap on top of it, it would have been in the ranks of some of-- and of course, shy of the Slack acquisition. That was, what, $27 billion a few years back.

And Slack being a household name, sure, it makes sense to pay that much for a company in Slack. But Tableau, when you think about that one, that was about $15 billion. So this one with a premium slapped on probably would have been somewhere in the ballpark of $11 to $12 billion. And that's just on an average premium that you typically see for many of the acquisitions, especially as companies like Salesforce, like SAP, like Oracle have this history and propensity to acquire, to grow instead of investing heavily to build something homegrown.

If they've already seen success within a competitor in a landscape that they want to get into, they'll just-- if they can, go out and buy it and hope shareholders don't push back on it here. So perhaps there was a little bit of the thinking that shareholders, if this price got too high, would push back on this in a big way.

SEANA SMITH: Yeah, exactly. Especially given the fact that Informatica, at least ahead of that report, had been climbing pretty steadily here since the start of the year.