Twitter is holding informal talks with several potential buyers after receiving interest from Salesforce.com, people familiar with the situation said.
Twitter’s board met several weeks ago after hearing from Salesforce, said the people, who asked not to be named because the information isn’t public. Twitter then hired Goldman Sachs and Allen & Co to solicit other potential buyers as well as Salesforce, the people said. Salesforce didn’t make a formal offer, according to the people.
While there’s no assurance an acquisition will happen, sale talks could accelerate into a deal in a matter of weeks, one of the people said. Twitter is also working with Goldman on options besides a full sale, like a divestiture of non-core assets, one of the other people said.
Twitter’s stock has fallen after several quarters of slowing growth, putting it in play as a potential takeover target. The company is still attractive because of its data, user base and influence in politics, culture and the media.
Twitter recently expanded into live video streaming, making it possible for some users to watch American National Football League games for free, with Tweets related to the game appearing alongside the video. It’s making similar deals for content related to politics, business and entertainment.
Twitter co-founder and board member Ev Williams fuelled takeover speculation last month when he said in an interview that the company has “to consider the right options.” He was responding to a question on Bloomberg TV about whether Twitter can remain an independent company.
This is the second time this year that Salesforce has jump-started a sales process of a large social media company. Salesforce expressed initial interest in acquiring LinkedIn, according to people familiar with the matter, ultimately leading to a sale to Microsoft.
Twitter shares surged 21% to US$22,62 on Friday after CNBC reported the company had received expressions of interest from several technology or media companies and may get a formal bid shortly.
Twitter could provide Salesforce with similar benefits to LinkedIn. Though Twitter is typically considered a consumer product, the social media company’s 313m monthly active users include many professionals — people who Salesforce customers already may be targeting for potential deals. Its data may help improve the Salesforce software that companies use to manage customer relationships.
More than 70% of sales professionals use social selling tools, including LinkedIn, Twitter and Facebook, to help close a deal, build stronger relationships and expand revenue, according to a LinkedIn report. And Salesforce itself in 2014 said Twitter was the “largest cocktail party in the world”, according to a post on its website.
Twitter may appreciate merging with a technology company as opposed to a media company, where it may have conflicts over content. 21st Century Fox, Comcast, Time Warner and AT&T are not interested in buying Twitter, according to people familiar with those companies’ strategies. And any acquirer would face challenges turning Twitter around, or moulding its strategy to suit new priorities.
“Microsoft’s LinkedIn acquisition has raised speculation of a Twitter takeover, though weakening user metrics and lack of clear strategic buyers suggest it wouldn’t command the same premium,” analysts at Bloomberg Intelligence said in a note.
Based on the value of Microsoft’s LinkedIn deal, Twitter is worth $16,7bn, excluding cash, Bloomberg Intelligence estimated. Twitter share gains Friday left the company with a market value of $16bn, according to data compiled by Bloomberg.
News of Salesforce’s potential interest helped send the software company’s stock down by 5,6% to $70,39, its lowest closing price since March. Analysts at Stifel argued against a deal in a note entitled: “An Open Letter to CRM: You Don’t Need to Buy the Cow.”
“We see little reason why Salesforce.com needs to outright own an advertising-driven business model with stagnating user growth and decelerating revenue growth at a price point that would likely be” more than $15bn, the analysts wrote.
Twitter is often rumoured as a takeover target, especially for Google, which has considered and then decided not to acquire the company over the years. Google aspires to be the main provider of information, and the rise of social media in the form of Facebook, Twitter, Snapchat and others has created a massive source of new data that is mostly out of the reach of its search engine.
Google already partners with Twitter to show recent tweets in its search results, and has worked to integrate Twitter with its DoubleClick advertising service. Twitter last year added Omid Kordestani, a former Google executive, as an executive chairman of its board.
Representatives for Salesforce, Alphabet and Twitter declined to comment. — (c) 2016 Bloomberg LP
