salesforce ceo marc benioff

It's acquisition week in the tech world.

Just a day after Vista Equity Partners announced its intention to acquire marketing automation provider Marketo for $1.79 billion, Salesforce flexed its billion-dollar wallet too, announcing plans to acquire e-commerce platform Demandware for $2.8 billion. 

The buy marks San Francisco-based CRM giant Salesforce's move into the e-commerce space and adds to its cloud platform lineup with the creation of a Salesforce Commerce Cloud. 

"Salesforce now has the commerce piece to add to its customer experience management story, alongside its native CRM plus marketing automation via ExactTarget acquisition," said Jill Finger Gibson, principal analyst for New York City's Digital Clarity Group. "However, Salesforce is still missing a crucial piece of CEM: no content management. Demandware has had to partner with WCM companies in the past in order to meet their clients content needs that can’t be addressed via the commerce platform capabilities."

E-Commerce Accolades

In Burlington, Mass.-based Demandware, Salesforce acquires its more than 1,000 employees and a platform routinely cited among the leaders in top industry analyst reports, including Forrester Research's wave for e-commerce platforms and Gartner's Magic Quadrant in the same category. Demandware also received Forrester's nod for being one of the top digital experience platforms last fall.

Demandware counts Design Within Reach, Lands' End, L'Oreal and Marks & Spencer as customers.

Shares of Demandware soared 55 percent today on word of the pending acquisition. The all-cash deal values Demandware at $75 a share, a 56 percent premium over yesterday’s closing price of $47.99. The deal values Demandware at roughly $2.8 billion net of cash acquired.

Other Bidders?

Finger Gibson told CMSWire that Salesforce's high price reflects the possibility of multiple bidders. She mentioned Adobe as a possible candidate as it too needs an e-commerce play to round out its offerings.

"Demandware is particularly strong in the retail/B2C segment," Finger Gibson said. "They are particularly good at helping clients get up and running and scale quickly. But a lot of commerce growth going forward is in B2B and B2B plus B2C — for example, large enterprises that sell to both markets, like manufacturers. And they don’t have a B2B strategy to speak of or reference customers to point to."

'Leader' in Digital Commerce

Under the terms of the agreement, Salesforce will begin an offer for all outstanding shares of Demandware for $75 per share, in cash. The transaction is expected to close in the second quarter of Salesforce's fiscal second-quarter 2017, which ends July 31, 2016, subject to customary closing conditions including regulatory and shareholder approval.

"Demandware is an amazing company — the global cloud leader in the multi-billion dollar digital commerce market," Marc Benioff, chairman and CEO of Salesforce, said in a statement. "With Demandware, Salesforce will be well positioned to deliver the future of commerce as part of our Customer Success Platform and create yet another billion dollar cloud."

Tom Ebling, CEO of Demandware, said the companies share the "same passionate focus on customer success."

"Becoming part of Salesforce," he said, "will accelerate our vision to empower the world's leading brands with the most innovative digital commerce solutions that enable them to connect one-to-one with customers across any channel."

Inside Commerce Cloud

The Salesforce Commerce Cloud will be a part of Salesforce's Customer Success Platform. Salesforce customers will have access to the Demandware enterprise cloud commerce platform. Demandware's customers get Salesforce's sales, service, marketing, communities, analytics, IoT and platform solutions.

The company expects the acquisition to increase its FY17 total revenue by approximately $100 million to $120 million. 

By 2019, eMarketer Inc. projects online purchases will more than double to $3.551 trillion, or 12.4 percent of total retail sales of $28.550 trillion. According to Gartner, worldwide spending on digital commerce platforms is expected to grow at more than 14 percent annually, reaching $8.544 billion by 2020.

Some of Salesforce's recent notable acquisitions include Metamind (April 2016), Steelbrick (December 2015), RelateIQ (July 2014) and ExactTarget (July 2013).

Salesforce reported a yearly revenue of more than $6.7 billion. The world's largest CRM company has 20,000 employees and is 17 years old.

Title image "Dreamforce2012-8" (CC BY 2.0) by piyush.k