“Salesforce.com Inc. agreed to buy Slack Technologies Inc. for $27.7 billion in cash and stock, giving the corporate software giant a popular workplace-communications platform in one of the biggest technology deals of the year,” Bloomberg writes.
The Details: Salesforce CEO Marc Benioff has a history of making deals, orchestrating more than 60 acquisitions over 21 years. This move marks Salesforce’s largest-ever acquisition and is expected to close by the end of July 2021. Slack investors will get close to $27, and near an 8% fraction of Salesforce stock, per share.
Why It Matters: “The Slack deal would give Salesforce, the leader in programs for managing customer relationships, another angle of attack against Microsoft Corp., which has itself become a major force in internet-based computing. Microsoft’s Teams product, which offers a workplace chatroom, automation tools and videoconference hosting, is a top rival to Slack.”
- Amazon, Microsoft and Google reportedly expressed interest in buying Slack before becoming a publicly-traded company in 2019.
Acquiring Slack gives Salesforce, an early leader in the cloud software space, ammo to keep targeting its yearly goal of 25% revenue increases. Slack’s, which watched sales increase 40% to $877 million this fiscal year, could be a boon to that effort.
- It also brings Salesforce one step closer to more than doubling its annual revenue of $17 billion in fiscal 2020 to $35 billion by 2024.
In the last few years, Salesforce also bought Tableau Software Inc. for $15.3 billion and MuleSoft Inc. for $6.5 billion.
Looking Ahead: Cloud computing remains on the rise as the Covid-19 pandemic keeps people at home. For companies like Slack and its competitor, Microsoft Teams, use has only grown, though Slack’s corporate billings have underwhelmed due to inconsistent demand from smaller clients. Now, Salesforce has an opportunity to push Slack’s platform to “existing customers around the world, making it even more popular.”
From Morning Cents 11/30/20:
This is probably a good long-term strategy for Salesforce ($CRM) and its stock.
- Salesforce’s core product may not have 20%+ growth anymore, but tacking on complimentary enterprise solutions like Tableau and Slack could provide growth synergies.
- It looks like Salesforce wants there to be a duopoly in Enterprise work software with Microsoft. Microsoft Office is a base layer of doing business and Salesforce is the dominant tool for sales teams. After that, they will compete on chat, data visualization, and other workflow tools.