Salesforce has announced that it has acquired the workplace messaging application Slack for a hefty price of $ 27.7 billion. This deal would be good for the CRM powerhouse that recently surpassed $20 billion in annual revenue, and would help it fight longtime industry leaders like Microsoft. This is the largest acquisition that the company has made in its 21-year history.
Rumors of the deal were in the market for quite some time, but this is the first time that the deal has been official announced by any of the involved parties.
Salesforce co-founder and CEO Marc Benioff said in a statement, “This is a match made in heaven. Together, Salesforce and Slack will shape the future of enterprise software and transform the way everyone works in the all-digital, work-from-anywhere world.”
Slack CEO Stewart Butterfield said, “As software plays a more and more critical role in the performance of every organization, we share a vision of reduced complexity, increased power and flexibility, and ultimately a greater degree of alignment and organizational agility. Personally, I believe this is the most strategic combination in the history of software, and I can’t wait to get going.”
Salesforce.com was one of the first Saas startups, and has emerged as a leader in cloud computing. In fact, the CEO of the company has hailed cloud computing as the wave of the future, to much derision.
Slack,on the other hand, specializes in helping the workers in a company communicate and makes the process easier while doing so. The application also facilitates external communication with customers and partners, a feature that will useful addition to Salesforce.
Microsoft, Salesforce’s long-time rival in their office 365 suite offers its own chatting service, Microsoft Teams which offers many similar features like Slack. Thus, to compete, Salesforce desperately needed a partner like Slack.
Benioff, the CEO of Salesforce.com is undoubtedly excited by the deal, since back in 2016 he lost out to Microsoft for the acquisition of Linkedin..
Slack had lost almost 40 percent of its valuation since it went public. The most recent earnings report suggests that the company has lost 16 percent of its value. Before news of this deal was out, the company’s shares were only worth a few dollars each. Therefore, this takeover is not a surprise. However, the surprise is the price. Both Yahoo and Google Finance values the company at just over $25 billion.
Many of the deals made by Salesforce have been financed by its stock. The company’s stock is worth seven times more than it was a decade ago. Salesforce is using its stock to pay for roughly half of the Slack purchase, some is being paid by cash, and some is being paid by money being borrowed during a time of extraordinarily low-interest rates.
Salesforce, in 2016 had bought Quip for $750 million. The software helps in socially sharing documents and when paired with Slack, Salesforce would be able to provide a more robust option compared to its earlier internal option Chatter.
