On Thursday, Salesforce (NYSE: CRM) announced that it would acquire Own Company (Private; “Own”) for $1.9 billion in an all-cash deal, as it bolsters data security.
Own, once called OwnBackup, offers data backup, disaster recovery services, and data analytics, particularly for cloud-based systems.
The New Jersey-based firm has raised over $500 million in funding from investors such as BlackRock, Tiger Global, and Salesforce Ventures. As of 2021, Own’s valuation was pegged at $3.35 billion.
Although Own initially focused on Salesforce’s customers, it has since expanded by forming partnerships with ServiceNow (NYSE: NOW) and Microsoft’s (NASDAQ: MSFT) Dynamics 365, a competitor to Salesforce’s core product.
This acquisition is the largest Salesforce has made since it bought Slack in 2021 for $28.2 billion and at an Enterprise Value to Revenue (EV/Revenue) valuation of 33.3x. Currently, Salesforce is trading at an EV/Revenue of 6.1x, which is below the US Large Cap SaaS Comps that are trading at an average of 9.0x (see Figure 1).
Earlier this year, Salesforce reportedly considered acquiring Informatica (NYSE: INFA), a data management software company, but the deal never closed.
Financial and Strategic Impact
Salesforce said it expects the Own acquisition to be accretive to free cash flow by the second year after closing. The deal is anticipated to close in early 2025, subject to normal regulatory approvals.
Salesforce also mentioned that the deal won’t change its fiscal year 2025 forecast, nor will it impact its capital return program.
Interestingly, this marks a return to larger deals for Salesforce, which had previously stepped back from mergers and acquisitions after CEO Marc Benioff disbanded the company’s M&A committee almost 2 years ago.
FIGURE 1: US Large Cap SaaS Comps
Source: S&P Capital IQ, eResearch Corp
Market and Industry Context
The acquisition aims to accelerate the growth of Salesforce’s data security and privacy products. According to KBV Research, the global data backup and recovery market was estimated at $12.9 billion in 2023, with an annual growth rate of around 11%.
“This acquisition underscores our commitment to providing secure, end-to-end solutions that protect our customers’ most valuable data,” said Steve Fisher, Salesforce GM, in a press release.
The move to acquire Own comes as businesses are paying more attention to data loss prevention and the need for strong data protection, given the growing risk of cyberattacks and system failures.
Recent ransomware incidents and the 2021 fire at the OVH data center in France have drawn attention to the importance of data security. Moreover, stricter regulations like the EU’s AI Act are prompting companies to adopt stronger data management practices.
Salesforce’s Acquisition Strategy
Last year, under pressure from activist investors, Salesforce made moves to focus on share buybacks and ease up on acquisitions. The company had drawn some criticism over its purchases of MuleSoft and Slack, as some investors questioned the return on those investments.
Still, Salesforce has continued to make smaller, strategic deals, including PredictSpring and Tenyx. In May, CEO Mark Benioff told analysts that the company would remain open to acquisitions as long as they were accretive and offered clear benefits to shareholders.
