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Three other firms courted Indy's ExactTarget before Salesforce landed prize

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For a bunch of computer nerds, ExactTarget Inc. certainly had a lot of suitors.

At least three other companies pursued the Indianapolis digital marketer amid its courtship with San Francisco-based Salesforce.com, which led to a $2.5 billion buyout announced June 4.

A U.S. Securities and Exchange Commission filing Wednesday details a bidding war in which Salesforce had to raise its offer repeatedly to keep pace with other would-be buyers. Records describe the suitors as “three other global software companies,” which are only identified as “Party A,” “Party B” and “Party C.”

Prior to the buyout announcement, analysts suspected Salesforce was leading a charge for ExactTarget. But corporations such as IBM, Adobe Systems and SAP also were on the list.

Discussions about a buyout go back as far as late 2012, when CEO Scott Dorsey and his leadership team began meeting periodically with the four companies.

Salesforce CEO Marc Benioff began meeting regularly with Dorsey and his officers on April 22, Wednesday's filing shows. Two days later, “Party A” told ExactTarget it had “a desire to move quickly” on a deal. Another two days later, on April 26, Benioff proposed a deal worth $26 apiece for ExactTarget’s 69.3 million shares.

It would have been a $1.8 billion deal that would have paid a 37-percent premium for shares that closed at $19.01 that day. Executives and advisers agreed that selling—to any of the four companies—was worth exploring, but a decision wouldn’t be made until weeks later.

Meetings and teleconferences continued with all the suitors into May. By May 9, ExactTarget’s leadership decide the company was worth more than $26 a share and agreed to suggest Salesforce boost its offer.

ExactTarget officials continued meeting with the other companies as they awaited word from Salesforce. On May 22, “Party B” offered $30 a share, which would translate to almost $2.1 billion—$300 million more than Salesforce’s first offer.

Dorsey followed up two days later with phone calls to Salesforce and “Party B.” Benioff responded later that day by matching the other company’s offer. After hearing that, ExactTarget and its financial advisers decided to see who would go higher.

“Party B” offered $30.50 a share but indicated it was willing to go as high as $32. It turned out to matter little because Benioff called a few hours later and offered to pay $33.75 per share. Salesforce sealed the deal with ExactTarget at that price June 3.

The deal represents a 53-percent premium to that day's closing price of $22.10 per share.

Technology sector observers expect the $2.5 billion deal to generate a ripple effect in startups and angel investing in Indianapolis. ExactTarget provided stock options to all employees, regardless of rank. The lofty sale price will generate option gains of nearly $300 million for the company's 1,700 workers.

The top three executives, meanwhile, are entitled to golden parachutes worth a total of $17 million, which is on top of the value of any shares they own outright, according to Wednesday’s SEC filing.

Dorsey accounts for more than half the parachute. He is entitled to receive almost $9.4 million under employment agreement terms governing a change in control. Most of Dorsey’s parachute, $8.5 million, comes through accelerated vesting of stock options and restricted stock.

Dorsey would forgo some of the parachute if he stays on after the sale, which he has said he will do. He is slated to join Benioff's senior management team and oversee ExactTarget as an independent unit.

Chief Financial Officer Steve Collins is entitled to a $3.7 million parachute, and Scott McCorkle, president of technology of strategy, is in line for $4 million, the filing shows.

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  • Didn't all those dot.com investors follow this reasoning
    I just don't buy....look at the future and ignore...(1)profitable completion, (2) no profits (3) limited fixed assets (4) technology that is easy to copy and steal. and (5) really good competition. In the bidding war, if you believe it, each of the loosers can start or continue to run their business...with the experience and record of making money. I recall the great investments in the dot.com companies....on-line pet food. Not many made money outside the people who started it. Investors lost everything. To me ExactTarget -- leading edge claiming....is about the same.
  • Congratulations
    Lost in the story is the amazing leadership of Scott Dorsey. I think the list of CEO's that have taken a company from its inception to a $2.5 billion sale is a very, very small one. Scott always fit the position - from when ExactTarget was only a few employees right up until present day. Well done. I'm still surprised Microsoft wasn't looking at ExactTarget given the amazing implementation of Microsoft technologies there.
  • What Bill Gates Learned from Buffett
    Look for a company’s moat—its competitive advantage—and whether the moat is shrinking or growing. A shareholder has to act as if he owns the entire business, looking at the future profit stream and deciding what it’s worth. You have to be willing to ignore the market rather than follow it, because you want to take advantage of the market’s mistakes.
  • A company without income sold to a company without money
    I have troubles with this sale. Salesforce does not have lots of cash for the purchase that I see. Salesforce does not have sales to support a 2.5 Billion dollar purchase. ExactTarget, loosing 7 cents for every dollar of sales. Salesforce, lost money for last year. It just does not add up. Add to this....really tough competition that currently makes money. (Only my pension fund manager would be dumb enough to invest in these companies.)
  • Adobe...
    Man, Adobe should have pulled the trigger on this. They really missed the boat. Adobe wants to be a SaaS and Adobe buying ExactTarget would have got them in that space WITHOUT making users rent Photoshop, read more here - http://goo.gl/CgBiL Just hope that ExactTarget stays in Indy. In hindsight, ExactTarget's M&A (iGoDigital, Pardot, etc...) were all about this 2.5 Billion M&A, lol.

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