When a significant rumor emerged last weekend that Salesforce was interested in buying Informatica, a legacy data management company that predates the cloud, it didn’t take long for investors to express their negative feelings on the idea. In fact, since the start of business on Monday, stockholders on both sides of the equation have been making it clear that they aren’t happy with a potential coupling between the two companies.

After the story broke that Salesforce was the suitor, the company’s stock price began dropping, and is down almost 4.6% over the last five days. This probably reflects investors’ concerns that the deal would see them overpaying for a moderate amount of additional revenue and not a ton of innovation. For Informatica investors, it was the opposite: The price was too low to warrant selling — they wanted more, more, more — and their stock also dropped, down over 7% over the same period.

That doesn’t mean a deal won’t happen, but it was frankly a surprise to even hear that Salesforce was back in the big M&A discussion and looking at another major deal after taking several years off. It seems that activist pressure last year combined with lower growth and higher interest rates had forced the company to rethink growth through M&A and embrace the joys of profitability and free cash flow. To appease them, Salesforce was able to stave off activist investors by being more conservative; conducting some big layoffs; and even disbanding the company’s internal M&A committee, which helped identify and vet possible M&A targets.

But you can’t keep an acquisitive company down forever, and historically it has been extremely acquisitive, buying 74 companies since its founding in 1999, with 13 coming in 2020 alone, per Crunchbase data. The biggest by far of that bunch was the $28 billion deal to buy Slack at the end of 2020. After that, Salesforce went mostly quiet with just six much more modest deals over the next three years.

As Salesforce projects growth slipping into single-digit numbers next fiscal year, perhaps the company sees a target like Informatica as a way to buy some revenue and brute force some additional percentage points. At the same time, it would be grabbing a data management platform at a time when getting your data house in order is particularly important in the age of generative AI.

It’s worth noting that SnapLogic CEO Gaurav Dhillon, who co-founded Informatica back in the 1990s, told MarketWatch this week that he thinks the coupling would be a bad idea for both companies and their customers. Though Dhillon is not exactly a neutral observer, he might not be wrong, either.

Ray Wang, founder and principal analyst at Constellation Research, sees Salesforce’s own data integration tooling as a stronger offering. “The potential acquisition of Informatica is quite curious as the client base and tech is not cutting edge. Although it could potentially solve a data integration challenge that Salesforce has had, Data Cloud is already a strong offering, so I’m not sure if this deal makes sense,” Wang told TechCrunch.

But Arjun Bhatia, a financial analyst at William Blair sees some upside to a possible deal from a strategy perspective. “The reported price is high, and it’s a bigger deal than I would have expected for them to start off with M&A again, but I think it makes sense strategically. Better to invest in the infrastructure first before getting too far down the application/copilot path. It’s a nicely profitable business, too, which is different from past acquisitions,” Bhatia said.

Nobody knows how this will end up, or who is right, but it’s worth exploring the underlying financials of these two companies to see if a deal would even make sense.

To buy or not buy, that is the question

Salesforce grew 11% in its most recent fiscal year. The company also told investors that it expects to grow by 9% in its current fiscal 2025. Salesforce’s trailing and forward growth numbers likely led to the company announcing a dividend for the first time along with boosting its share buyback program to $10 billion. Meta announced its first dividend around the same time.

By projecting 9% revenue growth and announcing a program to directly pay investors for holding its shares, Salesforce seemed to herald a different era for its business. It would grow at a modest pace, generate mountains of cash — the CRM giant had free cash flow of $3.26 billion in its most recent quarter — and dole out a large piece of those funds to investors through dividends and reductions to its share count.

You can imagine why some investors are therefore slightly confused that Salesforce is considering spending more than $10 billion on Informatica, a purchase that would add some revenue scale to Salesforce but little in the form of future revenue growth.

Informatica is also far smaller than Salesforce, making its potential revenue bump to Marc Benioff’s company modest. In its most recent quarter, Salesforce had revenue of $9.29 billion, and Informatica turned in $445.2 million. Salesforce had $1.45 billion worth of net income, and Informatica had $64.3 million.

Comparing the top and bottom lines of an acquiring company and its target will always lead to disparate numerical scale; but importantly, Informatica is not growing so quickly as to represent a material new source of expansion for Salesforce. Total revenue at Informatica grew 12% in its most recent quarter, around what Salesforce itself posted.

The ace up Informatica’s sleeve is that while its total revenue growth is slow, one important segment of its revenues is expanding quickly. The company reported that its “Cloud Subscription ARR,” or the recurring revenue associated with its “hosted cloud contracts” grew 37% to $616.8 million in its most recent quarter.

Certainly, 37% growth is in a different league than 9% or 10% or 11%. But Informatica’s cloud ARR is expected to grow 35% per the company to a range of “$826 million to $840 million” in its new fiscal year. At the top end of that range, all cloud subscription revenue from the smaller company would equate to around 2% of Salesforce’s expected revenue in its current fiscal year. If we were to compare Informatica cloud net-new ARR that it expects this year instead, the percentage becomes even smaller.

Put another way, the growth business at Informatica, while very important to its own worth and future, is very, very small compared to Salesforce’s current size, and would therefore have a modest-at-best impact on its overall growth rates.

If growth at Informatica post-acquisition is not expected to put Salesforce on a new, higher trajectory in growth terms and also does not deliver scads of new profitability, the deal has to rest on strategic impacts that are harder to measure at this distance. Certainly at the expected price tag, it seems that Salesforce would be paying steeply for a shot in the arm that looks more like a mosquito bite than something life-altering.