Salesforce ecosystem acquisition volume remained high in 2022
M&A deals for Salesforce consulting firms remained elevated in 2022, according to data from Equiteq, an investment bank specializing in the knowledge economy.
Salesforce is the most popular customer relationship management (CRM) software platform, owning nearly a quarter of the market, according to Statista.
There were 42 M&A deals in the Salesforce space in 2022, down slightly from the 47 deals registered in 2021 – but well above the 22 deals in 2020 and 17 deals in 2019.
Valuation multiples have trended up in the last eight years, increasing from 2x-2.5x revenue to 2.5x-3.5x between 2020 and 2023 year-to-date, according to Equiteq’s research.
North America has been the location of most Salesforce ecosystem deals since 2019, at 88, while EMEA had 25 deals, APAC had 19 deals, and Latam had three.
2022 saw increasing deal activity by financial sponsors and portfolio companies (portcos), which accounted for 41% of transactions.
Since 2019, the most deals by acquirer type were portco bolt-ons (39), followed closely by large-cap IT services firms (38).
PE-backed portcos are generally looking to scale their platform, add complementary capabilities, and improve their competitive positioning in the market via their M&A deals. Large IT services firms – such as Accenture, IBM, and NTT Data – are looking to augment or enhance their existing global Salesforce practices.
Large marketing groups like Dentsu, WPP, and Omnicom are also snapping up Salesforce consultancies to strengthen their digital capabilities in customer experience and commerce. Professional services firms, meanwhile, buy Salesforce consultancies to expand their capabilities to meet demand for increasingly complex digitized client interactions.
Salesforce will also itself occasionally invest in or purchase ecosystem partners, focusing on scaled businesses with strategic importance.
The largest deals in the last 12 months in the Salesforce space were NTT Data’s acquisition of US-based Apisero (2,000 employees), KKR’s acquisition of Israel-based Ness (1,750 employees), and Intelliswift’s acquisition of US-based Global Infotech (500 employees).
In terms of targeting, firms with under $20 million in revenue will attract interest from growth equity, small-cap PE, portcos, and small- and select large-cap strategics. Firms with $20-$50 million in revenue will see interest as a platform investment for PE, as well as from small- and large-cap strategics. Companies with $50-$150 million in revenue will attract large-cap IT services firms and PE suitors.
Acquirers seek out companies with a strong track record of completing large-scale projects, with a bias toward onshore delivery or well-managed offshore. Investors will also look for gross margins of 40% or higher, adjusted Ebitda margins in the 10-20% range, a high ratio of FTE employees to contractors, high employee retention, and a large number of relevant employee certifications.
