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Salesforce Confirms Deal To Acquire Slack For $27.7 Billion
The agreement for the CRM application giant to buy the collaboration service provider sets up a competitive collision course with Microsoft and its Teams collaboration applications.
Cloud CRM application giant Saleforce will acquire Slack Technologies, developer of the popular Slack online collaboration service, for $27.7 billion, the two companies announced Tuesday.
The acquisition sets up a competitive collision between Salesforce and Microsoft, whose own Teams collaboration software has gained huge market traction and user adoption this year.
Salesforce and Slack announced a definitive agreement under which Salesforce will buy Slack shares for $26.79 in cash and 0.0776 shares of Salesforce common stock (based on the Nov. 30 closing price of Salesforce stock) . That puts the total value of the deal at $27.7 billion.
“Stewart and his team have built one of the most beloved platforms in enterprise software history, with an incredible ecosystem around it,” said Marc Benioff, Salesforce CEO, speaking of Slack co-founder and CEO Stewart Butterfield, 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. I’m thrilled to welcome Slack to the Salesforce Ohana once the transaction closes,” Benioff said.
Slack, whose stock trades on the New York Stock Exchange under the symbol WORK, has a $25.05 billion market cap based on Tuesday’s $43.91 per share closing price. That market cap was about $17 billion before reports of a Salesforce acquisition began circulating.
The acquisition has been approved by both companies’ boards but remains subject to approval by Slack shareholders and required regulatory approvals and other customary closing conditions. The companies expect to complete the acquisition in Salesforce’s fiscal 2022 second quarter, which ends in July 2021.
“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,” Butterfield said in a statement.
“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,” Butterfield said.
Once the acquisition is complete Slack will become a Salesforce operating unit and will continue to be led by Butterfield and his management team, the companies said. That follows the model Salesforce has used with other acquisitions, including Tableau Software, which Salesforce bought last year for $15.7 billion.
The two companies said that Slack will be “deeply integrated into every Salesforce Cloud” and will become “the engagement layer” and “the new interface for Salesforce Customer 360” – the Salesforce term for its overall platform.
“We see in Slack as a once-in-a-generation platform. It’s the central nervous system of so many companies,” Benioff said Tuesday evening during the Salesforce fiscal 2021 third quarter earnings call. “When you look at what happens when you put Slack and Salesforce together, you know the fundamental experience for the customer just changes.”
“What this is all about is the value of the social enterprise and creating this incredible idea that you have this amazing hub of productivity and collaboration, of integration [and] applications, that now leverages all this amazing data,” said a buoyant Benioff on the call.
Slack, based in San Francisco, was founded in 2009 and began offering its collaboration service in 2013. The collaboration tools have grown rapidly in popularity and now have more than 12 million daily active users, according to the company’s web site, and more than 119,000 paying customers.
Benioff, on the earnings call, said that more than 90 percent of Slack’s enterprise customers are also Salesforce customers.
Salesforce, also based in San Francisco, was one of Slack’s earliest integration partners and the two vendors have expanded and tightened their partnership over the last few years. In October 2019 the two companies announced the Salesforce for Slack application, which allows sales and services professionals to more easily access and share information from Salesforce applications within Slack.
Salesforce has made dozens of acquisitions through its history, most of them small, but including several blockbusters. In August 2019 Salesforce made a major push into the business analytics space with the Tableau acquisition. That followed Salesforce’s 2018 acquisition of MuleSoft, a developer of cloud-based integration and API management technology, for $6.5 billion.
Microsoft introduced Teams in 2017 and the application has become increasingly prominent in workplaces – especially gaining traction this year as the COVID-19 pandemic forced many people to work from home. In October Microsoft CEO Satya Nadella said the Teams application at that point was being used by 115 million people, a 53 percent increase just from April.
The same day Salesforce announced the Slack acquisition, Microsoft unveiled a slew of new Teams Calling features within the Teams app that make Teams more of an alternative to traditional phones and PBXs.
Salesforce also competes head-to-head with Microsoft in the CRM application space where the flagship Salesforce cloud applications go up against Microsoft’s Dynamics 365 applications for sales, marketing, customer service and field service.
Salesforce currently offers an enterprise collaboration tool called “Chatter” that is part of the Salesforce.com platform. The company introduced Chatter at its Dreamforce conference in 2009 and the service became generally available in 2010.
Salesforce has not disclosed its plans for Chatter. But during the Salesforce fiscal 2021 third-quarter earnings call Tuesday, Benioff, while praising Chatter and what it has provided for customers, sounded as though Chatter had run its course.
“There’s no doubt that Slack has an incredible approach to collaboration in a way we never could have imagined,” he said in response to an analyst’s question that touched on Chatter.
For its fiscal 2021 third quarter (ended Oct. 31,2020) Salesforce reported revenue of $5.42 billion, up 20 percent from $4.51 billion in the third quarter of fiscal 2020. Net income for the quarter was $1.08 billion compared to a $109 million loss (due to a $173 million provision for income taxes) from the same quarter one year earlier.
Salesforce is forecasting that revenue for all of fiscal 2021 will reach $21.10 billion to $21.11 billion. That’s up 23 percent from fiscal 2020 and just slightly above what the company originally forecast at the start of the year and before the COVID-19 pandemic hit. The company is forecasting revenue between $25.45 billion and $25.55 billion for fiscal 2022.
For its own fiscal 2021 third quarter, Slack reported revenue of $234.5 million, up 39 percent year over year.
For all of fiscal 2020 (ended Jan. 31, 2020) Slack reported revenue of $630.4 million, up more than 57 percent from $400.6 million in fiscal 2019. . The company forecasts that revenue for all of its fiscal 2021 will reach $876 million, up 39 percent year over year.
During the Salesforce earnings call Benioff made light of the fact that Salesforce and Slack are near each other in San Francisco. “I look out my window and you know what I see? Slack’s logo. Because Slack’s building is right next to my building. And I’m looking into their building all the time.”