Upcoming/recent developments… Per the terms of the Merger Agreement (MA), the companies are set to file HSR by June 25, 2025.  Recent clearances of several high-profile deals, as well as DOJ Deputy AG (DAAG) Bill Rinner’s remarks last week that competitively neutral deals should not be the subject of a “regulatory review tax” could bode well for Salesforce/Informatica’s prospects of clearing without a second request.

Our outlook… Preliminary research suggests the proposed merger is unlikely to receive a second request from the DOJ.  Salesforce (via MuleSoft) and Informatica both participate in what Gartner refers to as the Integration Platform as a Service (iPaaS) market, but the companies have largely different approaches to integration.  MuleSoft specializes in API-led integration software, while Informatica is best known for providing extract, transfer, and load (ETL)-led integration software.  Most industry participants (who are not involved in the deal) do not consider these products to have interchangeable uses.  However, Informatica offers customers a product bundle that includes an API-led integration product that replicates some of the functionality of MuleSoft, creating some degree of head-to-head competition between the merging firms.  Moreover, there are concerns about Informatica losing its status as one of the few prominent independent integration players, as well as concerns that Salesforce could gain access to competitively sensitive information.  As such, we observe some risk that the DOJ will issue a second request.

* MuleSoft and Informatica have iPaaS software that enables the communication and exchange of data between a variety of on-premises and cloud applications.  One report estimated that the combined company had a ~30% share of the iPaaS market in 2020 (~15% each).  However, the companies’ products have largely distinct uses.  MuleSoft’s software is used to connect applications at the API layer and is event-based, essentially transferring a small amount of data between two applications (e.g., integrating a company website with Google Maps).  Informatica’s ETL software manages more complex tasks.  It will extract a large amount of unstructured data and structure it in a way that makes it easier to transport and ensure it makes sense in the next system.  Informatica’s ETL-led integration software often moves large amounts of data between operational storage and “data warehouses” or “data lakes.”  Industry participants uniformly consider Informatica’s ETL-led software to be a complementary component to Salesforce’s integration software tools.  MuleSoft and Informatica’s API-led integration and ETL-led integration products are considered to be best-in-class and have garnered widespread adoption amongst the large enterprise market (i.e., Fortune 1000).

* While the merging firms have what appear to be largely complementary iPaaS software solutions, Informatica also has an API-led integration tool that it bundles with a broader suite of software –Informatica Intelligent Data Management Cloud (IDMC).  The IDMC software suite includes software used for ETL data integration, API integration, data quality, data management, data governance, and privacy.  Former executives at the merging firms acknowledged that MuleSoft and Salesforce compete to some extent.  These industry participants recalled instances where customers chose Informatica’s IDMC bundle over MuleSoft and concluded that Informatica’s API-led integration tool was “good enough” (although not superior to MuleSoft).  In other cases, MuleSoft was successful in convincing customers they needed a “best-of-breed” API-led integration tool and switched to MuleSoft.  But, it should be noted that in many cases (particularly with the Fortune 100), customers purchased iPaaS software from both MuleSoft and Informatica.  And it is also important to note that the industry participants we interviewed were unaware of instances where customers leveraged an offer from MuleSoft to extract a better price from Informatica (or vice versa).  Industry feedback indicated that Informatica really only competed with MuleSoft at the proof-of-concept stage where a customer was considering the merits of an Informatica bundle versus a best-in-class approach that included MuleSoft API-led integration software.  Usually, by the time customers got to price negotiations, it was evident that MuleSoft could not manage bulk loading of data, and Informatica was unable to handle API integration as effectively as MuleSoft.  One industry participant remarked there was no “shopping of quotes” between the two firms.

* MuleSoft and Informatica also face competition in their respective segments of the iPaaS market.  Both companies compete with Boomi, which has a broad product suite that has ETL and API-led integration software capabilities.  However, Boomi has primarily focused on selling to small-and-medium-size businesses (SMB) and has less traction with large enterprises than the merging firms.  Other ETL-led integration players that compete closely with Informatica include SnapLogic and Jitterbit, who have apparently been gaining share in the large enterprise segment of the market.  MuleSoft faces less competition in the API-led integration segment, where companies like TIBCO have become increasingly irrelevant from a competitive perspective, while legacy application integration software players like Oracle, IBM, and SAP have fallen significantly behind in terms of capabilities and struggle to integrate with cloud workloads.  Google’s Apigee has apparently been the most successful upstart in the API-led integration space.  One IDC report estimated Salesforce/MuleSoft and Apigee had integration software market shares of ~19% and ~5%, respectively.  Legacy players like IBM (16%), Oracle (8.5%) and Microsoft (8.5%) accounted for the remaining balance, along with a long tail of other smaller players (~43.5% = Other).  It is important to note that while cloud service providers like Amazon AWS and Microsoft Azure offer API integration capabilities, they work only within their own native products and cannot distribute data across multi-cloud environments.

* It is also worth considering whether the proposed merger raises any potential non-horizontal issues.  On first glance, there may be concerns that by owning a product bundle that includes the best-in-class ETL and API-led integration products, the combined company will further entrench its arguable dominance in these market segments.  However, it may be a stretch to consider these companies dominant given the available market share estimates, and we remain of the view that anticompetitive bundling or entrenchment is a fundamentally attenuated theory of antitrust harm that current leadership at the DOJ and FTC will deemphasize.  There may also be concerns about the potential for Salesforce to foreclose rivals’ access to Informatica or interfere with its interoperability with rival applications, but industry participants believe this is unlikely due to the reputational effects of such conduct.  There is apparently no history of Salesforce engaging in this type of conduct either, including with respect to MuleSoft.

* There has been some concern or frustration that Informatica would lose its “Switzerland status,” (i.e., the only large-scale third party in the iPaaS market that is not owned by a large software platform) but it is not evident that the loss of such status is likely to have any adverse impact on competition (although there are concerns it could damage Informatica’s future sales prospects).  It should be noted that MuleSoft held a similar status prior to its acquisition by Salesforce, but no enforcement action was pursued against that deal.  One industry participant speculated that there could be concerns that Salesforce will have access to competitively sensitive information (CSI), particularly in regards to data analytics rivals such as Snowflake and Databricks that partner with Informatica.  Apparently, these rivals often bring Informatica product specialists into “pitch meetings” with prospective customers and so Salesforce could theoretically identify sales leads of some of its competitors.  But, this is a discretionary decision and such personnel can be left out of such meetings.  In any event, it is hard to foresee how this issue could substantially raise rivals’ costs or harm competition.

* Although we do not anticipate a second request given the complementarity of the companies’ iPaaS software solutions, there are some deals with a somewhat comparable fact pattern that have elicited second requests.  IBM’s acquisitions of both Red Hat and HashiCorp received second requests, despite the lack of evidence that the companies were close competitors.  IBM/HashiCorp may be a less relevant situation since the DOJ was reportedly unconcerned with the deal, which prompted the Khan-led FTC to assert jurisdiction.  We do not expect FTC Chair Ferguson to assert jurisdiction in this case, nor do we observe strong grounds to do so.  The Red Hat acquisition may be more analogous, in part because there was some overlap in application integration software products.  However, if Salesforce/Informatica receives a second request, we expect it will be of similar duration to RedHat (4-5 months) and may not be the gating item with respect to close given that the EC, U.K. CMA, and possibly China SAMR may have jurisdiction as well.  We doubt the EC or CMA will have concerns with the deal, but the prefiling process in those jurisdictions could delay closing into Q1, consistent with the companies’ closing guidance.  And it may be worth noting that in IBM/Red Hat (2019) and the recent IBM/Software AG(2024) deal, the EC considered the overall application integration software market to be dynamic and competitive.

* There have several notable developments suggesting the FTC and DOJ are limiting second requests to deals where staff observes a likelihood of enforcement action.  Over the last few weeks, four high-profile deals were cleared by the agencies that did not raise any substantive antitrust issues, but may have undergone a second request investigation by the FTC or DOJ under Khan and Kanter’s leadership.  These deals were Herc/H&E, Rocket Companies’ acquisitions of Redfin and Mr. Cooper (both of which were the subject of Sen. Warren (D-MA) letters), and James Hardie/AZEK.  Our research on those deals did not suggest any issues that warranted enforcement, and the agencies’ clearances of those deals may be further confirmation of our thesis prior to Trump’s inauguration that the DOJ and FTC under Slater and Ferguson’s leadership will be more adept at rationalizing resources and focusing their efforts on mergers that implicate traditional antitrust harm.  In this same vein, we took note of DAAG Rinner’s speech at the George Washington University antitrust conference last week in which he signaled that the Antitrust Division will return to a more traditional approach to merger enforcement, while also advocating for procedural predictability.  Rinner’s remarks were critical of Khan and Kanter’s efforts to increase the administrative burden of merger reviews to deter dealmaking.  Rinner stated the DOJ would reach a “swift determination on whether enforcement is needed…[and]…narrow our attention to genuinely anticompetitive transactions that violate the Clayton Act.  On the other hand, deals that are pro-competitive or competitively neutral should be able to proceed without a lingering regulatory review tax.”  A reasonable interpretation of these remarks may be that the agencies will be more selective in issuing second requests and focus their resources on deals where there appears to be a material risk of antitrust harm.

Watch for these developments… Further remarks from DOJ and FTC leadership regarding changes to merger enforcement efforts and process.  Rinner’s speech may reflect a coordinated effort by the agencies to signal receptivity to deals as earlier remarks made by Slater and Ferguson were to some degree interpreted as a continuation of Khan and Kanter’s enforcement posture.  While we are speculating, Rinner’s speech last week, as well as a recent speech by FTC Commissioner Melissa Holyoak, strikes us as an effort by the administration to counter that earlier perception and stimulate dealmaking and therefore may result in a further uptick in clearances of deals without a second request.