Progress's M&A model focuses on acquiring companies at a price that, after executing on cost synergies, results in an effective EBITDA multiple lower than their own public market multiple. This creates immediate value for shareholders through arbitrage.

After a large, debt-funded acquisition, deleveraging should be the top priority over share buybacks. Choosing buybacks sends a mixed signal, disappoints investors expecting a return to the growth playbook, and leaves the company too financially constrained to pursue future strategic M&A opportunities.

Acquiring smaller companies at a 5-6x EBITDA multiple and integrating them to reach a larger scale allows you to sell the combined entity at a 10-12x multiple. This multiple expansion is a powerful, often overlooked financial driver of M&A strategies, creating value almost overnight.

Even when shares trade at a low multiple, restarting a proven M&A strategy can be superior to buybacks. M&A drives faster growth, accelerates deleveraging, and enhances competitive position, leading to greater multiple expansion and long-term value creation.

Instead of massive share buybacks, Salesforce has a rare opportunity to acquire category-leading companies with double-digit growth (like Braze or Zeta) at low cash flow multiples. This M&A strategy would be immediately accretive and could restart stalled growth—a stark reversal of its past habit of buying companies at peak revenue multiples.

As illustrated by SpaceX's $60B acquisition of Cursor, a high valuation is more than a vanity metric; it's powerful M&A currency. It allows a company to make large, strategically vital acquisitions with less shareholder dilution, effectively turning market perception into a tangible competitive advantage.

Inspired by baseball's 'Wins Above Replacement' (WAR) metric, M&A should be evaluated not against doing nothing, but against a 'replacement-level' use of capital, such as a share buyback. A buyback is a readily available, low-risk alternative that most acquisitions fail to clear as a comparable benchmark.

The current M&A landscape is defined by a valuation disparity where smaller companies trade at a discount to larger ones. This creates a clear strategic incentive for large corporations to drive growth by acquiring smaller, more affordable competitors.

For legacy companies in declining industries, a massive, 'bet the ranch' acquisition is not an offensive growth strategy but a defensive, existential one. The primary motivation is to gain scale and avoid becoming the smallest, most vulnerable player in a consolidating market, even if it requires stretching financially.