Activist Shareholders Threaten to Overthrow Salesforce Board and Force Sale of Major Acquisitions Like Slack and Tableau

It’s been a tumultuous few months at Salesforce, including mass layoffs and an executive exodus that included a co-CEO. But the real chaos may be yet to come.

The cloud software giant is now in the crosshairs of activist firm Elliott Management, which has acquired a large stake in the company. That makes Elliott the second such company to target Salesforce, after Starboard Value disclosed its stake in the company in October while pushing for cost reduction at the company.

Insider reported this week that the move has Salesforce employees worried about more layoffs than those already announced, as those activists have pressured CEO Marc Benioff to show higher profit margins.

But longer term, Wall Street pundits believe Elliott’s involvement could signal more changes that go beyond simply cutting costs.

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It is very likely that these investors will be able to evict most, if not all, of Salesforce’s board of directors in one fell swoop. And if that weren’t enough, some analysts believe these activist companies could prompt Benioff to at least explore the possibility of ditching mega-acquisitions like Slack, MuleSoft and Tableau. This could lead to Salesforce ending its remote work policies and allowing at least some employees to return to the office, analysts speculate.

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Unlike many other tech companies, Salesforce appoints its board members to one-year terms, which means they must be reappointed by shareholders each year. JMP Securities analyst Pat Walravens told Insider that Elliott and Starboard could capitalize on the situation by rallying support to replace many or most of the board seats with their own nominees at the next meeting this year.

That’s not necessarily a bad thing, he said: Five of Salesforce’s board members, including Benioff himself, have held their positions for fifteen years; The Walravens think they can target those veterans and try to bring fresh blood with fresh ideas to the company.

“I think there is broad agreement that the Board of Directors needs to be modernized,” Wallravens said.

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Some want Salesforce to sell Slack and Tableau
Salesforce has come under fire for the $27.7 billion increase it paid for the workplace messaging app Slack, especially since the deal came on the heels of big acquisitions of companies like data analytics firm Tableau and the data integration company MuleSoft.

Many of these acquisitions, notably Slack, were masterminded by Brett Taylor, the former Salesforce co-CEO who resigned in a surprise move late last year. Following Taylor’s departure, some believe that the involvement of activist investors may push Salesforce to recoup some of that investment by selling those companies.

“Salesforce has been in ’empire building’ mode for far too long and should focus more on its core market opportunities,” RBC analysts wrote in a note to clients this week. “One way to extract value from assets that we consider secondary is to divest,” he said.

However, Salesforce likely won’t get the full amount it paid for Slack if it sells it under current market conditions, RBC notes. However, she believes that some acquisitions like MuleSoft, ClickSoftware or Heroku would be profitable if sold, with less disruption to business.

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Salesforce can return to the office and renew executive compensation
It could also push Elliott and Starboard to make relatively small but no less significant changes.

Walravens says activist companies could encourage Salesforce to rethink its back office strategy. The company has invested heavily in a global real estate footprint, including the Salesforce Tower headquarters in San Francisco. Those offices are now largely empty as the company has embraced remote work during the pandemic. While the company has cut back on some of its office space as the tech market has tanked, it still has plenty.

In some context, Benioff himself has signaled a willingness to bring employees back to the office: he recently faced backlash within the company after suggesting remote work could be responsible for lower productivity among contract employees over the years. of the pandemic. Now, Salesforce may want to go ahead and make sure its already expensive real estate is put to use.

Another change Walravens thinks could be on the cards is renovating