[whoisjuan]

One year after their IPO? I don't get this. Why didn't they buy it last year paying a premium over the 17 USD a share of their public offering instead of paying a premium over the current 33 USD (or 40 USD I guess)? I don't understand the rationale behind these deals.

[nemo44x]

How do you know they didn’t try? Mulesoft doesn’t have to agree to terms of an offer.

It’s not like Salesforce could have even bought a large percentage of the shares when they went on offer. You don’t make 100% of the company available.

Sometimes companies ipo to prove to buyers that they believe their market value is higher than potential buyers think. I can’t speak for Mulesoft but their stock has been mainly excellent and their transition to a public company has been fantastic.

Mulesoft brought a great company to market and Salesforce was willing to pay a 23% premium. Mulesoft thought that was fair - today.

[adventured]

That's like asking why didn't Yahoo, Google, Apple, Amazon etc. acquire Netflix after the Qwikster debacle when the stock imploded down to $7.x / share losing ~80% of its value (now $317 / share).

As irrational as it sounds (and it is), companies overwhelmingly prefer to chase strength in acquisitions. It makes everything about it look and sound better. They don't care about the cost difference, it's not their money/value being vaporized. They care about protecting their job, so they want positive optics, something that is perceived to move the needle on value.

[ggg9990]

It’s not irrational. Integrating an acquired knowledge work company is a costly and risky effort in terms of management bandwidth, culture clash, and business model alignment. Unless you are buying pure assets, it rarely makes sense to acquire a questionable company and risk poisoning your own. That’s why most acquisitions are of companies too small to jeopardize the acquirer or healthy enough to be a low risk and worth the effort.

[cylinder]

Question is why would MuleSoft sell itself if they thought they'd be worth more a year later?

[thaumasiotes]

MuleSoft did sell itself; that's what an IPO is.

Presumably, there was a reason.

[cylinder]

That's not true. An IPO is just that, a public offering, of a small amount of shares to raise capital. Some shareholders cash out some of their position at IPO.

[erikb]

It's not like going to the super market. And it depends on more factors than price. E.g. Salesforce's competition status plays a role as well, also whatever the current power struggle between different Salesforce managers, etc.

Usually in a big-enough company the least efficient thing happens instead of the most efficient thing. But the advantage of the big company is that it can play bigger games than your average small company. And if a small company succeeds at playing bigger then you can still buy it. So despite what HR and your manager might tell you, efficiency is not as important for survival.

[abakker]

The price for a reasonable amount of due diligence, market proof, and disclosure.

[1290cc]

Got to spend those profits some how. Salesforce probably calculated that if they include integration with every deal for an additional 15% to 20% they could grow revenue X%.

This is going to be really good for system integrators as Mulesoft is a complex platform that requires hours of consulting. If I was in the Salesforce space I would be signing up to Mulesoft courses and getting my guys all over that.

[philip1209]

Could this be related to the tax law changes?

[stock_toaster]

I was wondering that too. Maybe cash repatriation is at work here?