Salesforce’s $1.9B Acquisition of Own Company: Strategic Implications and Investment Opportunity

Salesforce’s recent acquisition of Own Company, a leading SaaS data protection startup, for $1.9 billion in cash has sparked considerable interest and debate among investors and industry analysts. This report delves into the strategic implications of the acquisition, evaluates Salesforce’s current financial health, and assesses whether Salesforce (CRM) stock is a good buy. By examining the details of the acquisition, market trends, and financial metrics, this report aims to provide a comprehensive analysis to inform potential investors.

Introduction

Strategic Rationale Behind the Acquisition

Enhancing Data Security and Protection Capabilities

The acquisition of Own Company aligns with Salesforce’s strategic focus on enhancing its data security and protection capabilities. Own Company, formerly known as OwnBackup, specializes in automated backup and disaster recovery solutions for cloud applications, primarily within the Salesforce ecosystem. With over 7,000 customers and a strong presence in the data protection market, Own Company brings valuable expertise and technology to Salesforce.

Steve Fisher, President of Salesforce’s Einstein 1 platform, emphasized that the acquisition underscores Salesforce’s commitment to providing robust data protection solutions amid rising cybersecurity threats. As data security becomes increasingly critical in a rapidly evolving tech landscape, this acquisition positions Salesforce to better address customer concerns regarding data loss due to system failures, human errors, and cyberattacks.

Leveraging AI and Data Management

Own Company’s expertise in analyzing historical data and providing data protection solutions could have broader applications beyond backup, particularly in the context of artificial intelligence (AI) and data management. Salesforce has been investing heavily in AI technologies, and integrating Own Company’s capabilities could enhance its AI-driven data management solutions. This strategic move aligns with Salesforce’s goal of becoming a leader in generative AI and data management, particularly in regulated industries such as financial services and healthcare.

Financial Implications of the Acquisition

Valuation and Discount

Salesforce acquired Own Company at a 43% discount from its previous valuation of $3.35 billion in a Series E funding round in 2021. This reflects a broader trend of declining SaaS valuations post-pandemic, driven by high inflation and rising interest rates. Despite the discount, the acquisition is seen as a disciplined move that enhances Salesforce’s capabilities without compromising its financial goals.

Impact on Free Cash Flow and Earnings

Analysts from Mizuho and Wolfe Research have expressed positive views on the acquisition, highlighting its potential to contribute to free cash flow starting in the second year post-acquisition. Mizuho analysts believe the acquisition will enhance Salesforce’s data and AI strategy, while Wolfe Research analysts suggest it positions Salesforce well within the $150 billion data protection market, potentially unlocking a $30 billion segment in cloud data.

Salesforce has stated that the acquisition will not impact its full-year guidance or capital return program. This indicates that Salesforce is maintaining a stable financial outlook despite the acquisition. The company’s latest financial results for Q2 2025 showed earnings per share of $2.56, surpassing the consensus estimate of $2.36 and the previous year’s figure of $2.12. Salesforce also experienced an 8% increase in sales, driven by a 9% rise in subscription and support revenues.

Stock Performance and Valuation

Salesforce’s stock has experienced a nearly 7% decline in value for the year to date, currently trading at $242.66 per share. Despite this, analysts maintain a positive outlook on the stock. Mizuho Securities has maintained an Outperform rating on Salesforce with a price target of $300, reflecting confidence in the company’s strategic direction and operational margin progression. William Blair analyst Arjun Bhatia has also maintained a Buy rating, citing the strategic acquisition and attractive valuation as key factors.

Salesforce’s stock is currently trading at a significant discount, with a valuation of 19 times the projected 2025 free cash flow estimate, compared to a peer group median of 29 times. This suggests potential for growth, particularly as the acquisition is expected to be cash flow accretive by the second year.

Market Trends and Competitive Landscape

Declining SaaS Valuations

The broader trend of declining SaaS valuations post-pandemic has created opportunities for strategic acquisitions at discounted prices. Salesforce’s acquisition of Own Company at a 43% discount from its previous valuation is a prime example of this trend. As valuations continue to decline, Salesforce may pursue additional acquisitions to bolster growth and fill gaps in its product offerings, particularly in areas like DevOps and RevOps.

Growing Importance of Data Security

The global data backup and recovery sector, which Own Company operates in, was valued at $12.9 billion in 2023, with a projected compound annual growth rate of 10.9% from 2017 to 2023. The growing importance of data security is driven by increasing threats like ransomware and regulatory requirements in various regions. As data security becomes a top priority for businesses, Salesforce’s acquisition of Own Company positions it to better address these concerns and capture a larger share of the data protection market.

Competitive Impact

The acquisition is likely to disrupt competitors in the backup and data protection space, similar to the impact of Salesforce’s earlier acquisition of Steelbrick, which altered the landscape for other CPQ providers. By integrating Own Company’s capabilities, Salesforce can offer more comprehensive data protection solutions, potentially attracting customers from competitors and strengthening its market position.

Conclusion: Is Salesforce a Good Buy?

Based on the analysis of the strategic rationale, financial implications, market trends, and competitive landscape, Salesforce appears to be a good buy. The acquisition of Own Company enhances Salesforce’s data security and protection capabilities, aligns with its AI and data management strategy, and positions it well within the growing data protection market. Despite the recent decline in stock price, analysts maintain a positive outlook, citing the strategic acquisition and attractive valuation as key factors.

Salesforce’s financial performance remains strong, with earnings surpassing estimates and an 8% increase in sales. The acquisition is expected to be cash flow accretive by the second year, contributing positively to Salesforce’s financials without impacting its full-year guidance or capital return program. With a valuation of 19 times the projected 2025 free cash flow estimate, Salesforce stock represents a potential growth opportunity, particularly as the company continues to invest in strategic acquisitions and AI technologies.

In conclusion, Salesforce’s acquisition of Own Company is a strategic move that enhances its capabilities and market position, making Salesforce stock a compelling investment opportunity for long-term growth.