Why Salesforce Paid $6.5B for MuleSoft — API Integration and the Digital Transformation Hub
$6.5B · May 2018 · Anypoint Platform · API Integration · CRM Ecosystem Expansion
Background
MuleSoft, founded in 2006, provided an API integration platform-as-a-service (iPaaS) solution called Anypoint Platform that connected enterprise systems (legacy ERP, cloud SaaS, mobile apps, IoT devices) via APIs. Listed on NYSE (MULE) in March 2017, MuleSoft had 1,800+ customers including Fortune 500 companies.
The biggest bottleneck in enterprise digital transformation was 'system connectivity.' The average enterprise used over 1,100 software applications, but most couldn't communicate with each other. MuleSoft's Anypoint Platform solved this connectivity problem, earning the title 'the API operating system of the enterprise.'
Salesforce needed comprehensive integration capabilities to connect all customer enterprise data into Salesforce for CRM platform growth. Connecting Oracle ERP, SAP, and legacy systems to Salesforce CRM required complex custom integration work, which MuleSoft standardized into ready-to-use APIs.
On March 20, 2018, Salesforce announced the acquisition of MuleSoft at $36/share (36% premium) in a cash and stock combination. Total of $6.5B — the highest EV/Revenue multiple (~16×) for a listed enterprise software acquisition at that time. The deal was completed rapidly in just six weeks on May 1, 2018.
Deal Summary
- Deal Value
- $6.5B ($36/share, cash + stock combination)
- Acquirer
- Salesforce, Inc.
- Target
- MuleSoft, LLC
- Announced
- March 2018
- Closed
- May 2018
- Country
- United States
Executive Summary
- $6.5B — Highest EV/Revenue multiple (~16×) for listed enterprise SW at announcement time
- MuleSoft Anypoint Platform: Enterprise API integration platform — 1,800+ Fortune 500 customers
- Salesforce strategy: CRM alone → becoming the hub connecting all enterprise systems (Customer 360)
- Core bottleneck of digital transformation solved — legacy/cloud/API integration middleware
- MuleSoft revenue contribution exceeded $1B (2020) — major revenue driver within 2 years of acquisition
- MuleSoft → Salesforce Integration Cloud brand expansion (from 2019)
Industry Overview
The iPaaS (Integration Platform as a Service) market has been growing at 15%+ annually with enterprise digital transformation acceleration. With the average enterprise using over 1,000 software applications, demand for API integration platforms connecting them has exploded. Gartner consistently ranked MuleSoft as a leader in its iPaaS Magic Quadrant.
iPaaS Market Size
$3.5B
2018, growing 15%+ annually
Average Enterprise Software Count
1,000+
Root cause of API integration demand
MuleSoft Customer Count
1,800+
Including Fortune 500
Gartner Magic Quadrant
Leader
iPaaS category, consecutive years
Key Players
Company Overview: MuleSoft, LLC
MuleSoft, founded in 2006, is an iPaaS (integration platform) company with Anypoint Platform as its core product. Anypoint handles API design, implementation, management, and monitoring end-to-end, with 400+ connectors for immediate connection to major enterprise systems. It was growing rapidly after its 2017 NYSE listing.
Annual Revenue (FY2017)
~$400M
58% YoY growth
Customer Count
1,800+
Including Fortune 500
Anypoint Connectors
400+
Enterprise system connections
EV/Revenue Acquisition Multiple
~16×
$6.5B / ~$0.4B
Revenue by Segment (FY2018)
Deal Structure
Salesforce paid MuleSoft shareholders $36/share in a cash and stock combination — specifically $28.22 cash + $7.78 Salesforce stock per share. MuleSoft was delisted from NYSE and became a wholly owned Salesforce subsidiary.
Pre-Deal
Salesforce, Inc.
NYSE: CRM
MuleSoft, LLC
NYSE: MULE, publicly listed
Post-Deal
Salesforce, Inc.
NYSE: CRM
MuleSoft (Salesforce)
Salesforce Integration Cloud expansion
Key Terms
Advisors
Specialist M&A advisors supported both sides of the deal.
Acquirer (Salesforce) Advisors
Goldman Sachs
Financial Advisor (FA)Acquisition structure and valuation
Wachtell Lipton Rosen & Katz
Legal CounselTransaction documents and board duties
Target (MuleSoft) Advisors
Qatalyst Partners
Financial Advisor (FA)Fairness opinion and negotiation
Fenwick & West
Legal CounselShareholder protection and transaction documents
Advisor information based on public sources.
Financials
Unit: USD million. Based on MuleSoft public filings.
| Item | FY2016 | FY2017 | FY2018 |
|---|---|---|---|
| Revenue | USD 188million | USD 297million | USD 401million |
| COGS | USD 50million | USD 78million | USD 100million |
| Gross Profit | USD 138million | USD 219million | USD 301million |
| SG&A | USD 200million | USD 290million | USD 350million |
| Operating Income | USD -140million | USD -180million | USD -200million |
| EBITDA | USD -120million | USD -150million | USD -170million |
| EBITDA Margin | -63.8% | -50.5% | -42.4% |
Valuation
Salesforce applied a significant premium to MuleSoft's high-growth (58% YoY revenue growth) SaaS revenue and iPaaS market leadership. EV/Revenue of 16× was the record multiple for listed enterprise software at that time.
| Metric | Value | Notes |
|---|---|---|
| Acquisition Price (EV) | $6.5B | $36/share |
| FY2018 ARR | ~$400M | 58% YoY growth |
| EV/Revenue | ~16× | Record for listed enterprise SW |
| Premium vs 30-day avg | 36% | $36/share |
| Post-acquisition revenue contribution | $1B+ | Salesforce FY2020 annual contribution |
Financial metrics based on public data estimates.
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Deal Rationale
Salesforce's Acquisition Rationale
- Customer 360 strategy completion — hub connecting all enterprise data to Salesforce
- Legacy system integration acceleration — removing friction when adding Salesforce with existing ERP/SAP
- iPaaS market preemption — acquiring the #1 company in a rapidly growing API integration market
- Customer ACV expansion — MuleSoft platform bundling drives upsell and cross-sell
- Digital transformation essential infrastructure — becoming the enterprise system connectivity hub maximizes switching costs
MuleSoft Management and Shareholder Rationale
- 36% immediate premium — clear value realization vs near-term stock price
- Salesforce's global customer base accelerates Anypoint Platform adoption
- R&D and sales expansion scale incomparably better than as an independent company
- Reinforced position with global #1 Salesforce integration amid intensifying iPaaS competition
Post-Deal Assessment (2024-12 as of)
Post-acquisition, MuleSoft became the core of Salesforce Integration Cloud. MuleSoft revenue contribution exceeded $1B in 2020, becoming a major revenue driver within 2 years of acquisition. Salesforce used MuleSoft to build the Customer 360 Data Platform, enabling enterprises to integrate customer data from all channels into a single view. MuleSoft is considered one of the most successful acquisitions among Salesforce's multiple 'cloud' products.
Positives
- MuleSoft revenue contribution exceeded $1B (FY2020) — major revenue driver within 2 years
- Customer 360 strategy completion — all enterprise system data integrated into Salesforce
- Salesforce Integration Cloud brand expansion — strengthened iPaaS market position
- Successful MuleSoft cross-sell to existing Salesforce customers — ACV expansion
Risks & Concerns
- High acquisition multiple (EV/Revenue 16×) — near-term ROI pressure
- Competition from Microsoft Azure and Google Cloud native integration services intensifying
- Growing Salesforce product complexity — requires sales and marketing integration
This announcement appears as a matter of record only
Salesforce, Inc.
Acquirer
MuleSoft, LLC
Target
Strategic Acquisition — API Integration Platform
Transaction Size
$6.5B ($36/share)
USD 6.5B
EV / EBITDA
N/A (growth-stage loss-making company)
Multiple
Closed
May 2018
Deal Date
Editor's Note
The Salesforce-MuleSoft acquisition is the execution of a strategy to 'become an ecosystem hub, not just a platform.' A standalone CRM can only capture a portion of enterprise IT budget, but becoming the connectivity hub (API integration) for all systems can capture a much larger piece of the pie. MuleSoft's role in Salesforce's Customer 360 strategy was not just one product but 'the glue holding the entire platform together.'
Key Concepts in This Deal
CRM → connectivity hub for all enterprise systems — acquisition for Customer 360 platform expansion
MuleSoft Anypoint Platform = enterprise API OS — maximizing switching costs strategy
EV/Revenue 16× — record multiple for listed enterprise SW, high-growth SaaS premium
CRM (upper) + API integration middleware (lower) — expanding influence within enterprise IT stack
Frequently Asked Questions
Why did Salesforce pay a high price of $6.5B for MuleSoft?
MuleSoft's value lies in Anypoint Platform's role as the 'glue' of enterprise IT infrastructure. With enterprise software counts exceeding 1,000, the API integration platform connecting them is extremely difficult to replace once deployed. For Salesforce, if MuleSoft becomes the hub connecting all enterprise systems to Salesforce, customer Salesforce dependency increases dramatically. This strategic value justified the EV/Revenue 16× high multiple.
What is MuleSoft's Anypoint Platform?
Anypoint Platform is an integration platform connecting enterprise systems (legacy ERP, SAP, Oracle, Salesforce, cloud SaaS, mobile apps, IoT devices) via APIs. It handles API design, implementation, deployment, management, monitoring, and security end-to-end, with 400+ pre-built connectors for immediate connection to major enterprise systems. It's called the 'API OS (API Operating System)' of enterprises.
How did MuleSoft contribute to Salesforce post-acquisition?
MuleSoft became the core of Salesforce Integration Cloud. By FY2020, MuleSoft's revenue contribution exceeded $1B, becoming a major revenue driver within 2 years of acquisition. More importantly were the strategic synergies: connecting enterprise legacy systems, SAP, and Oracle to Salesforce CRM via MuleSoft significantly increased Salesforce's average contract value (ACV) per customer. It became a key pillar of the Customer 360 platform.
What does this acquisition mean in the context of Salesforce's M&A strategy?
The MuleSoft acquisition was Salesforce's decisive turning point from a standalone CRM vendor to 'the platform for enterprise digital transformation.' Subsequently, Salesforce made similar plays acquiring Tableau ($15.7B, data visualization) and Slack ($27.7B, collaboration). The strategy's core was building a Customer 360 ecosystem where MuleSoft handles 'connectivity,' Tableau handles 'analytics,' and Slack handles 'collaboration.'
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Sources & Notes
- [1]Salesforce Press Release — Salesforce Signs Definitive Agreement to Acquire MuleSoft (March 2018)
- [2]MuleSoft Form S-4 / Proxy Statement (2018)
- [3]Gartner Magic Quadrant for Enterprise Integration Platform as a Service (2018)
- [4]Salesforce Annual Report FY2020 — MuleSoft Revenue Contribution
- [5]Bloomberg — Salesforce Buys MuleSoft for $6.5 Billion (March 2018)
- [6]The Wall Street Journal — Salesforce Pays Premium for MuleSoft's API Platform (2018)