THE NEUTRAL ZONE
Salesforce, the customer relations giant, will acquire the messaging platform Slack for approximately $27.7 billion, one of the largest business deals in software history.
The deal is the biggest acquisition in Salesforce’s 21-year history and should help it compete with Microsoft, analysts said. The company specializes in software applications that assist companies in keeping their customers happy and loyal.
Marc Benioff, Chairman and CEO of Salesforce, described the deal as a “match made in heaven.” Stewart Butterfield, Slack CEO and founder, said the deal is “the most strategic combination in the history of software.” The acquisition is expected to close in the second quarter of Salesforce’s 2022 fiscal year, pending approval by regulators and Slack stockholders.
The Slack acquisition marks an escalation in the competition between Salesforce and Microsoft, as Slack and Microsoft’s messaging platform, Teams, are major competitors. “Slack is probably a bigger threat to Microsoft in some ways than Salesforce is because Slack’s use case hits at the heart of Microsoft’s information worker’s productivity suite,” said Gregg Johnson, a former Salesforce executive and the CEO of Invoca Inc., which uses artificial intelligence to help businesses track and analyze customer conversations.
Slack felt Microsoft’s bull-like pass rush: In a May interview with The Verge, Butterfield said, “Microsoft is perhaps unhealthily preoccupied with killing us, and Teams is the vehicle to do that.” Slack filed a complaint in the European Union in July, accusing Microsoft of anti-competitive behavior by bundling Microsoft Teams into Office 365 in a way that blocks its removal.
Microsoft gets 115 million daily users on Teams, while Slack had about 12 million users prior to the coronavirus pandemic. An infusion of cash and marketing know-how from Salesforce has the potential to turn that around, according to Daniel Newman, principal analyst at Futurum Research.
Salesforce to Acquire Slack for $27.7 Billion – New York Times – 12/1/2020
Salesforce has had its own work collaboration product, called Chatter, since 2010. Chatter has had “limited traction,” according to a Goldman Sachs report last week that touted the “strategic merit” of Salesforce buying Slack.
Salesforce buying Slack in $27.7B deal – Fox Business – 12/1/2020
The workplace communications company, which has seen its stock advance since the news broke a deal was in the works, has seen its popularity rise with the work-from-home trend. “Salesforce started the cloud revolution, and two decades later, we are still tapping into all the possibilities it offers to transform the way we work. The opportunity we see together is massive,” said Stewart Butterfield, Slack CEO and Co-Founder in the press release.
Salesforce is acquiring workplace chat app Slack for $27.7 billion – The Verge – 12/1/2020
Both Salesforce and Slack have only become more vital during the coronavirus pandemic as companies worldwide have moved to remote work and moved substantial portions of their businesses online. Joining together ensures both platforms can better compete against Microsoft, Oracle, and other competitors.
Salesforce buys Slack in a $27.7B megadeal – TechCrunch – 12/1/2020
Ultimately, Slack was ripe for the taking. Entering 2020 it had lost around 40% of its value since it went public. Consider that after its most recent earnings report, the company lost 16% of its value, and before the Salesforce deal leaked, the company was worth only a few dollars per share more than its direct listing reference price. Toss in net losses of $147.6 million during the two quarters ending July 31, 2020, Slack’s uninspiring public valuation and its winding path to profitability and it was a sitting target for a takeover like this one. The only surprise here is the price.