Salesforce CEO Marc Benioff announced during an earnings call that the company has disbanded its mergers-and-acquisitions committee (M&A) to focus more on the company’s existing business.
- The software company made several large acquisitions in recent years, including Mulesoft for $6.5 billion in 2018, Tableau for $15.6 billion in 2019, and Slack for $27.7 billion in 2021.
- Frequent acquisitions have drawn criticism from activist investors such as Elliott Management and Starboard Value, which have pushed for Salesforce to reduce spending.
- Recently, Salesforce announced plans to reduce costs by $3 billion to $5 billion and laid off around 10% of its workforce, Fortune reports.
- During the same earnings call, Salesforce predicted its operating profit margins would increase this year, a change from both its own previous projects and analysts.
Why it’s news
The software company made several significant acquisitions recently, including Mulesoft for $6.5 billion in 2018, Tableau for $15.6 billion in 2019, and Slack for $27.7 billion in 2021. The company itself has been popular among investors and its product largely admired in the business community. Benioff himself is a high-profile CEO, always boasting about super-growth and new acquisitions. So this announcement is a bit of a departure from the norm.
By disbanding the M&A committee, Benioff is giving in to demands from activist investors. Over the last several months, several activist investor groups took stakes in Salesforce after years of steady growth and continued acquisitions, Bloomberg reports.
Salesforce’s growth is slowing, but its profitability continues to improve. After reducing its overall headcount, the company’s profit margins have improved, and it recently approved additional stock buybacks.
Following the announcement that the M&A committee was dissolved, Elliot Investment Management released a statement saying Benioff’s report “represents progress toward regaining investor trust. The acceleration of margin targets, commitment to responsible capital-return priorities, creation of a business transformation committee and disbanding of the M&A committee are necessary steps forward.”
The investment company isn’t totally satisfied with Salesforce’s current status and added that it needed “a sustainable leadership plan and a board that demonstrates it can provide accountability through proper oversight.”