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Why Salesforce Could Acquire Zuora?

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CRM market abuzz with speculations that Salesforce, the world’s number 1 customer relationship management (CRM) giant, has its eyes on acquiring Zuora (NYSE:ZUO).

In this blog, we will explore the possible reasons why Salesforce could acquire Zuora.

Marc Benioff is already a large Zuora shareholder
One of the strongest arguments that Salesforce could acquire Zuora is that there is already a strong bond between the two companies. Tien Tzuo, Zuora’s founder and CEO, was employee No. 11 at Salesforce. He worked in Salesforce for nine years and rose to the role of Chief Strategy Officer.

Salesforce’s CEO Mark Benioff personally invested $6.5 million in Zuora when Tien Tzuo was ready to start his own company. Today, the undisclosed initial investment of Benioff is worth more than $40 million that makes him one of Zuora’s top 10 shareholders with 2.7% of the total shares outstanding.

Salesforce’s enterprise cloud software services could be extended by Zuora
An enterprise software platform, Zuora helps subscription-based companies manage and bill their clients. For instance, an online video streaming company can theoretically use the platform of Zuora for keeping track of subscribers and handling billing. This will help the streaming company to emphasize on delivering the product.

Salesforce's enterprise cloud software services could be extended by Zuora

The product of Zuora addresses a market that was not satisfied by pre-existing enterprise resource or customer relationship software, such as Salesforce. As of now, Salesfore is not addressing the market for subscription management or billing software. Therefore, acquiring the product suite of Zuora would be extremely beneficial for Salesforce. Moreover, acquiring a fast-growing company such as Zuora would also boost the overall growth rate of Salesforce.

Zuora’s product natively works within software of Salesforce

Zuora, thanks to its connection between Zuora’s founder and Salesforce, ensured that its product was compatible with the software of Salesforce. The interesting thing is that Zuora is not just compatible with Salesforce but it was actually built to work in coordination with Salesforce’s customer relationship management (CRM) system. This was done with a predefined purpose to beef up what clients can do with their customer data if they use both Salesforce and Zuora. In fact, Zuora has noted its synergy with Salesforce software in its marketing materials.

Existing and deep product alignment is another critical factor that could make Zuora an attractive acquisition target for Salesforce.

Stock of Zuora is on sale

The stock price of Zuora despite the wide range of interesting set of products and fast revenue growth rate has not performed well since its IPO in 2018. Initially, the stock moved higher but it has struggled over the last year as investors have discarded the stocks of many recent tech IPOs.

Stock of Zuora is on sale

It is highly likely that Salesforce would jump the gun to acquire Zuora given its depressed share price.

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