Salesforce Puts Jigsaw Together

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 |  About: Salesforce.com, Inc. (CRM)
by: 451 Research: Inorganic Growth

Just three months after Salesforce.com raised $575m in a convertible note offering, the CRM vendor is dipping into its treasury for the largest deal in its history. The $142m purchase price for Jigsaw Data is more money than Salesforce.com spent, collectively, on its previous seven acquisitions. (Add to that, there’s a potential $14m earnout that Jigsaw could pocket.) Yet, even after it pays for this pickup, Salesforce.com will still have more than $1bn in cash on hand. The transaction is expected to close this quarter.

We understand that Jigsaw finished up last year with about $18m in revenue, and Salesforce.com indicated that it was expecting $17-22m in non-GAAP revenue from Jigsaw for the three quarters that the company will be on the books this fiscal year. According to our calculations, Salesforce.com is valuing Jigsaw at roughly the same level that the target is currently valued by public investors, at least on one basis metric. Salesforce.com is paying about 7.9 times trailing sales for Jigsaw while its own market cap is about 8.3 times trailing sales. (Of course, shares of the on-demand CRM vendor are currently changing hands at their highest-ever level, having more than doubled over the past year.)

For Jigsaw, the sale to its longtime partner also represents a solid return for its backers, who wrote the checks that funded the company’s growth to 1.2 million members and more than 21 million contact records. Jigsaw’s three investors (El Dorado Ventures, Norwest Venture Partners and Austin Ventures) put in a total of $18m over the past six years. Strictly in terms of money in/money out, that means Jigsaw is returning almost eight times its investment. Not many startups have been able to deliver those kinds of returns recently because they’ve typically been overfunded and exit multiples have increasingly been under pressure.