Google (GOOGL) Seen Targeting Salesforce (CRM) in Blockbuster Deal, Arete Analyst Sees Deal At $105

January 31, 2017 9:51 AM EST

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Alphabet (NASDAQ: GOOGL) may be interested in Salesforce.com (NYSE: CRM). Given the strength in the March call activity for Salesforce it would appear Alphabet is preparing a bid for Salesforce and some traders are speculating upon such.

A Fortune article on Monday stated: "When First Round Capital asked startup founders which company they most wanted to acquire their startup, they chose Alphabet more than any other company. Eleven percent of those surveyed voted for Alphabet, 5% chose Facebook, 4% chose Amazon and 4% chose Salesforce."

It would appear reasonably obvious that Alphabet would over pay for Facebook (NYSE: FB), struggle to buyout Amazon (NASDAQ: AMZN), leaving the rumor-popular Salesforce as the next candidate. Alphabet did not buyback any stock in 2016, likely shoring up capital for a Salesforce purchase. Given that Microsoft, a leading rumored contender for Salesforce, bought LinkedIn, it appears that Alphabet is on the prowl for Salesforce.

The article goes on to quote Google's corporate development head Don Harrison as saying (emphasis ours): "It’s very hard to apply valuation metrics to AI. These acquisitions are driven by key talent -- really smart people. It’s an area I’m focused on and our team is focused on. The valuations are part and parcel of the promise of the technology. We pay attention to it but don’t necessarily worry about it."

Management is a big thing for Alphabet. Salesforce recently experienced a slew of management changes. Also recall the company angered shareholders after pursuing its own takeover of Twitter (NYSE: TWTR) but later decided not to buy it amid the pushback.

Analysts at Arete believe Salesforce would be a great target for Google. In a note to clients issued on Monday, analyst Richard Kramer commented that Salesforce is one of the few scale players Google could buy. A deal at $105/share would be EPS neutral, he said. He also doesn't see regulator push-back.

Salesforce bucked the market movement Monday by gaining 0.68% versus the S&P 500 decline of 0.57%.



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