Salesforce Acquires Traction on Demand

Transaction Overview

• On February 25, 2022, Salesforce (NYSE: CRM) announced it would acquire Traction on Demand.
• Traction on Demand is a golobally active Salesforce partner with over 1500 employees, headquartered in Canada, and offices in the United States, India, Australia, and New Zealand.
• Traction Sales and Marketing Inc., doing business as Traction on Demand, is a Salesforce consulting and software development partner firmly established in the North American Salesforce ecosystem.
• Traction on Demand will be integrated into the Salesforce Professional Services to accelerate CRM integration.

Salesforce Directs Attention to Professional Services

• Salesforce had been inactive in the M&A market despite successfully converting Slack into a strategic acquisition in December 2020.
• This acquisition indicates a clear investment in their Professional Services division, which is considerably underdeveloped when compared to subscriptions.
• Traction on Demand will assist with existing operations in multi-cloud deployments, Salesforce application recommendations, and global adoption programs.
• Traction on Demand will be utilized as direct consulting with existing and prospective subscribers and providing advanced education.
• Furthermore, Traction on Demand will provide Salesforce with greater diversification in alternative services, with Salesforce dependency on subscriptions.

Salesforce Financials: Subscription vs Professional Services Revenue

• Salesforce subscription revenue increased 25% over the last year, indicating that the software giant is well-positioned in the prospective cloud-based CRM space
• Professional services had greater revenue growth for Q3 2022 were $0.48 billion, an increase of 45% year-over-year
• In 2021 Salesforce reported Professional Services cost of revenue of $1.284 billion with only $1.276 of revenue in this portion of their business
• Additionally, Professional Services composed a meager 6% of total revenue for both FY 2020 and 2021
• The acquisition of partner Traction on Demand conceivably offers more utility in expanding Salesforce’s application across industries, rather than generating substantial revenue from Professional Services contracts
• In acquiring Traction on Demand, Salesforce will also gain software development support along with existing software offerings including:
  1. Traction Enable: collaborative work management platform for Salesforce solutions
  2. Traction Complete: data and analytics for the account matching and routing in customer outreach
  3. Traction X-Ray: digital transformation platform optimization
  4. Traction Steps: improves customer service leveraging Salesforce AI

TBP’s Experience in the Salesforce Ecosystem

• Recognize investment in AST Corporation
• Simplus Raises $20m Series C and Acquires Sqware Peg
• Infosys Acquires Simplus in a $200m Deal
• Salesforce Ventures and Delta V Invest in OSF Commerce’s Commitment to Innovation
• OSF Digital Announces $43 Million in New Funding
• Togetherwork acquires Fonteva
• AST Corporation acquires Serene
• Enquero acquired by Genpact

Salesforce Compared to Competitors

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TBP was NOT a financial advisor on this transaction.