$3.78 billion Box is reportedly exploring a sale amid investor pressure. Here's who could buy it — and why.

  • Box is exploring a sale amid pressure from activist investor Starboard Value LP, Reuters reported on Monday.
  • Box is reportedly discussing deals with companies and private equity firms.
  • Analysts told Insider that Zoom, Salesforce, Google, or a private equity firm could be interested in buying Box.
  • See more stories on Insider’s business page.

File sharing firm Box is exploring a sale amid pressure from hedge fund and activist investor Starboard Value LP, Reuters reported on Monday, citing people familiar with the matter.

The company has discussed potential deals with interested parties — including other companies and private equity firms — but a sale isn’t certain, the report said.

Three analysts that spoke to Insider floated several companies that might want to acquire Box, including Salesforce or Zoom. They also said that a private equity buyout might make sense, too. 

“They might be better off either private or as part of a larger company,” DA Davidson analyst Rishi Jaluria told Insider. “With the current management team and current technology, [they’ve] taken this as far as they can and so there’s more value to be unlocked that way.” 

Why Starboard is putting on the pressure 

Since Starboard first invested in Box in September 2019 — it currently holds a 7.9% stake — the activist investor has pushed the firm to achieve greater growth. 

In March 2020, Box announced an agreement with Starboard to add three new independent directors to its board in a bid to bring in new ideas. However, following 11% year-over-year revenue growth — it reeled in $770 million in revenue in 2020 up from $696 million in 2019 — Starboard wasn’t satisfied: It believed that growth was insufficient given the pandemic-spurred shift to remote work. 

Because Box hadn’t experienced as significant a boost to its business as other cloud firms, Starboard was preparing to launch a board challenge unless it made major changes, Reuters reported in February. Three out of Box’s nine board members (including CEO and cofounder Aaron Levie) are up for election at the company’s annual shareholder meeting this spring — and exploring a sale might allow Box to appease Starboard, Jaluria said. 

Box’s stock price surged as much as 10% on the news, but closed Monday at $23.65 a share, giving it a market cap of $3.78 billion. Though Box’s stock is up roughly 100% over the past year, according to Markets Insider, it’s down 13% from its record highs in May 2018. 

 Which companies might want to buy Box 

Salesforce, Google, IBM, Citrix, and Zoom could all be potential buyers for Box, analysts told Insider. 

Salesforce — which is buying Slack for $27.7 billion — could use Box to build its presence in the collaboration market, said Patrick Moorhead, the founder of analyst firm Moor Insights and Strategy. The two companies already have integrations and Jaluria also pointed out that Box was on a leaked M&A target list from Salesforce in 2016. 

Zoom is another acquirer contender, Moorhead and Futurum Research analyst Dan Newman said. The video conferencing company is looking for potential M&A targets to expand beyond video conferencing given its massive growth amid the pandemic, it said on a recent call with analysts.

Although less likely, Google would also make sense, analysts said. Box “could be a good complement to Google Workspace and help grow enterprise traction for Google Cloud,” Jaluria wrote in a note to clients Monday.

While Moorhead said he doesn’t “see the benefit of it getting bought by anybody but one of the big players,” Jaluria and Newman see a sale to a private equity firm as a likely route for Box.

In recent months, private equity firms have bought software companies with “stalled growth,” Jaluria said, citing Thoma Bravo’s purchase of Talend and Vista Equity Partners buying Plualsight. 

A private equity firm could buy Box, take the company private, and make changes aimed at spurring growth. After holding it for a period of time, it could either sell it or take it public again (like Silver Lake did with Dell in 2018, after originally taking it private in 2013). 

This would give Box “a chance to work on growth over a long horizon,” Newman said as it works to move beyond document sharing. 

Box recently acquired e-signature company SignRequest and has deepened its integrations with productivity suites from Google and Microsoft over the last year. It’s aiming to build a “content cloud” where customers can both store their documents and manage the business processes around them. 

While the firm’s revenue may not have spiked in 2020, it has made progress, Nucleus Research analyst Barbara Peck told Insider. 

“I think that rather than capitalizing on the pandemic, as some other vendors have done without a good product, Box has made strides and created synergies,” Peck said, “That have really allowed it to really help the market that’s working from home.”

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