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Salesforce (CRM -5%) and Informatica (INFA -9%) are seeing their shares slip today despite a potential M&A deal between the tech firms. The WSJ reported today that CRM is in talks to acquire INFA, which currently commands a market cap of around $10.5 bln, making it potentially CRM's largest purchase since paying $27.7 bln for Slack in 2021.

Typically, the acquired firm tends to enjoy a healthy bump in its share price on news of a possible takeover. However, INFA is enduring a sell-off worse than CRM. The cause lies in reports noting that CRM wants INFA below Friday's closing price of $38.50. Meanwhile, CRM shares are also taking a hit as investors question whether now is a good time to snatch up INFA, which could come at a hefty price, and embed it into its long-term vision revolving around generative AI.

• What does INFA do? The company offers an AI-powered data management cloud platform, allowing its customers to connect all types of enterprise data and pursue strategies based on cloud analytics. Given its attention to AI, shares of INFA have benefited enormously from the surging interest in the relatively new technology, doubling as of Friday's close since November and flirting with all-time highs achieved shortly after its October 2021 IPO.
• However, despite the secular AI-induced tailwind, INFA's revenue growth has not been overly impressive, climbing by 11.6% yr/yr in Q4 and ending FY23 with a mild 6.0% improvement. Furthermore, INFA expects FY24 revs to edge just 6.3% higher. As such, CRM investors are concerned that, despite possibly presenting a takeover offer below INFA's recent highs, the company may be overpaying.
• CRM is also exploring a massive acquisition during a measured buying climate, which weighed on its recent FY25 (Jan) revenue outlook. CFO Amy Weaver commented in February that the impact of a muted buying environment from the past year takes time to ultimately flow through its subscription revenue stream.
• Still, even if CRM offers around $35.00/share to acquire INFA, it would translate to a 6x forward sales multiple, tracking closely to CRM's. Also, with AI being thrown into the ring, tech firms are quickly hunting for ways to either maintain their leadership position in their respective fields or overtake a close rival. Given INFA's software and extensive customer base, including Marathon Oil (MRO) and Lenovo (LNVGY), the company appears to be a good fit for CRM, helping it lead the customer relationship management industry.

Talks between CRM and INFA surrounding a possible merger are driving a sell-the-news reaction on both sides today as CRM shareholders are concerned about the price it could pay, while INFA shareholders are upset about a below-market price it could receive. Nevertheless, despite today's reactions, both companies are engaging in complementary lines of business and could each benefit from the other. Perhaps the more overarching issue centers on when the broader spending environment will rebound more meaningfully.