Technology

Salesforce to Acquire Demandware for $2.8B

The deal puts Salesforce in the same fast-growing space as Oracle and SAP, which already offer cloud-based e-commerce services.
Katie Kuehner-HebertJune 1, 2016

Business software developer Salesforce is expanding into e-commerce, announcing Wednesday it had agreed to acquire Demandware for $2.8 billion.

Demandware makes software that businesses use to run e-commerce websites, providing a new avenue for Salesforce as it competes with companies such as Oracle and SAP, which already offer cloud-based e-commerce services.

Salesforce will pay $75 per share in cash for Demandware, a  56% premium to its closing price Tuesday of $47.99. The stock soared on Wednesday, closing at $74.78.

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“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,” Salesforce’s CEO Marc Benioff said in a news release.

According to Gartner, worldwide spending on digital commerce platforms is expected to grow at more than14% annually, reaching $8.544 billion by 2020. “The e-commerce market has been growing at a blistering pace as retailers expand their online presence, boosting demand for software that helps manage functions such as payment processing and inventory management,” Reuters said.

Brands using Demandware software in their e-commerce platforms include Design Within Reach, Lands’ End, L’Oréal, and Marks & Spencer.

Salesforce, founded in 1999 by Benioff, helps companies to streamline their sales operations via subscription-based cloud software. The acquisition of Demandware is expected to increase Salesforce’s annual revenue by between $100 million to $120 million while trimming adjusted earnings per share by 7 cents.

“Salesforce is banking on corporate clients gradually shifting away from hosting their own e-commerce platforms and transitioning to software-as-a-service, or SaaS,” USA Today reported.

According to Fortune, the integration of the two companies could be challenging. While Salesforce’s software is more customer facing, meaning that salespeople and marketers use it to track sales and interact with their customers or prospects, Demandware sells backend infrastructure to big retailers or product companies.

“Demandware is literally infrastructure, it takes someone’s whole ability to take stuff to market and puts it on the internet,” said Joel Fishbein, managing director for financial services firm BTIG. “That could make things somewhat challenging.”