The software giant has shown a significant appetite for M&A in recent years and has a huge market cap and plenty of cash. Here are a few public and private companies that could be good fits for Microsoft.

Since Satya Nadella became CEO of Microsoft Corp. (MSFT – Get Report) in early 2014, he’s shown he’s not afraid to open the company’s purse strings in pursuit of growth and synergies.

While Microsoft’s $26.2 billion 2016 purchase of LinkedIn gets the most attention, the software giant has bought over 40 companies of various sizes during Nadella’s tenure — notably, a $2.6 billion purchase of Minecraft developer Mojang, a $320 million purchase of cloud app security firm Adallom and an acquisition, reportedly for $400 million to $500 million, of leading mobile app development tool provider Xamarin.

With Microsoft now sporting a $600 billion-plus market cap and sitting on $129 billion in cash as of the most recent quarter, it has some leeway to pull the trigger on additional big deals without seriously unsettling investors. With the qualifier that it’s very tough to know just what a company’s M&A team is thinking, here are a few names that Microsoft, given its history and priorities, could be willing to put on its shopping list:

1 and 2. Workday and ServiceNow

Two years ago, Microsoft was reportedly willing to offer $55 billion to buy cloud CRM software leader Inc. (CRM – Get Report) . While those talks ultimately fizzled out because Salesforce (now worth $77 billion) wanted a higher price, they did suggest that Microsoft is willing to open up its checkbook to buy a leading enterprise cloud app (SaaS) provider.

The LinkedIn deal was arguably a SaaS play, depending on how one looks at LinkedIn’s recruiting and social selling tools. But it wouldn’t be shocking if Microsoft, whose Dynamics business apps are more likely to be used by small and mid-sized firms than larger enterprises, felt it was worth making another move to significantly grow its enterprise SaaS footprint.

If it did, Workday Inc. (WDAY – Get Report) and ServiceNow Inc. (NOW – Get Report) , as the largest SaaS pure-plays not named Salesforce, could catch its attention. Workday, worth $23 billion, is the top provider of cloud human capital management (HCM) and financials apps for enterprises, and it has also rolled out analytics tools and apps meant for universities.

ServiceNow, worth $22 billion, is the top provider of cloud-based IT service desk software and is also now a meaningful player in the IT operations management (ITOM) and IT business management (ITBM) software spaces. Buying the company would extend Microsoft’s reach within corporate IT departments and yield some synergies with the company’s System Center systems management software platform.

3. Twilio

Twilio Inc. (TWLO – Get Report) , the top provider of cloud-based communications services for websites and apps, continues to trade more than 50% below its 2016 highs thanks to worries about tougher competition and efforts by certain big-name clients (such as Uber) to shift to in-house communications tools. But Twilio still has quite a few blue-chip clients, and at its current market cap of $2.4 billion (less than five times expected 2018 sales), some deep-pocketed suitors might want to take a look.


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