There is no doubt about Salesforce being an acquisitive company. Salesforce has, over the years, acquired many companies. In addition to this, there are well-reasoned speculations on what Salesforce might be acquiring next. In the same vein, there are reasons to believe that Zuora might be one of the companies that Salesforce would acquire next.
There are a few key reasons pertaining to this speculation of Salesforce acquiring Zuora. Here are the 4 reasons why Salesforce could acquire Zuora.
It is pertinent to mention here that Zuora is a company that renders services to subscription-based portals to manage their clients and also bill them accordingly. It is an enterprise software platform. Here is an example of how Zuora comes into help for the subscription-based companies - a company involved in the online streaming of videos can use Zuora’s enterprise software platform to keep a record of how many subscribers they possess and how they are to be billed for the streaming services. By outsourcing this task, the company can solely focus on delivering an efficient and good quality product/service.
Salesforce does not possess the tools to cater to the market needs that are being fulfilled by Zuora. The founder & CEO of Zuoro, Mr. Tien Tzuo, got the idea to build Zuora by conducting market research among Salesforce customers. They specified the problems faced by them, which are not being fulfilled by Salesforce.
Therefore, this is one of the 4 reasons why Salesforce could acquire Zuora as Salesforce does not address the market need of providing subscription-based billing software. Hence, acquiring Zuora will definitely turn out to be fruitful for Salesforce.
Salesforce and Zuora already hold a strong relationship between them. Mr. Benioff holds a substantial number of shares in Zuora. It is noteworthy that Mr. Tien Tzuo, founder and CEO of Zuora, worked at Salesforce for a period of nine years and was one of the initial employees of Salesforce. In addition to this, Mr. Tzuo rose up to the position of Chief Strategy Officer (CSO) at Salesforce.
Mr. Benioff invested an amount of $6.5 Million in Zuora when Mr. Tzuo decided to start it. Benioff went on to give his blessings to Tzuo for his startup. Benioff was the first Pre-IPO funder in Zuora during the funding’s “Round A.” It is speculated that today, Benioff holds about 3% of total shares of Zuora with an investment of about $40 Million, which makes him the top ten shareholders in the company.
Though Salesforce in itself does not hold any shares in Zuora, Benioff, being the key decision-maker of Salesforce, could go on to acquire Zuora. Hence, acquiring Zuora could be really good for Salesforce.
Zuora is more or less in financial distress. Though the company holds with it some really interesting products along with good growth in revenue, the price of the share has not been performing well for over two years now. It is pertinent to mention here that the company went public in the year 2018 at a price of $14 per share. Since its IPO of April 2018, the share prices went up for a small period but had been struggling ever since.
This is another key reason why Salesforce might want to grab on to the opportunity of acquiring Zuora. It is a proven fact that a company having depressed share prices such as Zuora, would not want to decline the offer.
Salesforce and Zuora are compatible with each other, to state in simple terms, Zuora would work properly with Salesforce. The reason being that Salesforce and Zuora hold a strong relationship since its inception and personal relations between both the founders. In addition to this, Zuora was built with the motive that it could work seamlessly and in coordination with the CRM software of Salesforce.
The fact that the two software are compatible and in coordination with each other was never kept a secret. Zuora made sure to display the synergy between the two software in its marketing material. Zuora’s ability to weave better leverage and functioning of its CRM data is due to the ability to work in coordination with the Salesforce’s application.
Therefore, this could be a reason that holds a good amount of gravity in the decision-making process of acquiring Zuora by Salesforce.
Final Words: It is always speculation as to which company shall acquire which company. But, given the above reasons, Salesforce and Zuora’s relation gives some good reasons as to why acquiring Zuora would be a beneficial decision for Salesforce. At the end of the day, the decision to sell Zuora remains on its founder and CEO, Mr. Tien Tzuo.