Salesforce to Buy Slack for $27.7B
Deal adds more enterprise collaboration and productivity tools to cloud computing giant’s portfolio
Salesforce is pulling the trigger on its plans to buy workplace collaboration app maker Slack, confirming rumors of a deal that began emerging over the past week.
The Lowdown: Salesforce will spend $27.7 billion to acquire Slack in a cash-and-stock deal that will see Salesforce incorporate the company’s technology in a range of Salesforce cloud-based services. Both companies’ boards of directors have approved the acquisition, which is expected to close in the middle of next year.
The Details: The cloud computing giant will integrate Slack into Salesforce Customer 360, a customer management tool that lets organizations connect Salesforce applications, essentially creating a central hub that pulls together all the data and records of a customer to create a profile on them.
Slack will become the interface for Salesforce Customer 360, giving customers new ways to collaborate and communicate and enabling them to react to information not only across Salesforce but also from other business apps and systems. The goal is to create a more connected customer experience that will make users more productive and enable them to make better and faster business decisions.
The acquisition also gives Salesforce a more powerful collaboration tool than the current Salesforce Chatter and one that will allow the Software-as-a-Service (SaaS) company to better compete with Microsoft Teams and other cloud-based communications solutions, all of which have seen rapid growth during the COVID-19 pandemic.
For Slack, the deal will enable it to take advantage of Salesforce’s reach in enterprises. Slack’s Connect and other technologies are used by a range of Fortune 500 companies, such as Starbucks, Target, and TD Ameritrade. It’s also used by academic institutions, nonprofit organizations, and governments in more than 150 countries. Salesforce has more than 150,000 customers that range from SMBs to Fortune 500 companies.
Slack’s open platform integrates with more than 2,400 apps that are used for working and collaborating. It now will combine with Salesforce’s massive enterprise application ecosystem, helping organizations improve productivity and operations and making it easier and faster for developers to create new software.
The Impact: The planned acquisition is the latest significant deal in the software industry on par with others, including IBM’s $34 billion purchase of Red Hat in 2019. Slack brings with it more than 12 million daily users and offers an array of business productivity capabilities, from video meetings to IT administration. IBM earlier this year chose Slack to run chat communications for its 350,000 workers and this summer struck a deal with Amazon Web Services to run its offerings on the AWS cloud.
Having Slack in the fold will give Salesforce more collaboration features at a time when vendors across the board are seeing demand for their existing offerings grow — think Microsoft and others — or creating their own chat and productivity tools.
Background: Salesforce is also getting a company that has struggled since going public last year, even as the global public health crisis and the ensuing shift to remote work has put a premium on cloud-based communications solutions. In the second quarter, revenue grew 49%, but Slack still was unable to turn a profit over the past three quarters despite having more than 130,000 customers. The rumors of an acquisition by Salesforce sent Slack’s stock price soaring by 38% the day before Thanksgiving, but until then it reportedly had lost about 40% of its value as a public company.
In Salesforce, Slack is hooking up with a financial powerhouse. On the same day that it announced the Slack deal, Salesforce also released is latest quarterly financial numbers, which showed revenue increasing 20% year over year to $5.42 billion and revenue projections for the next quarter jumping 17%. Guidance for the company’s next fiscal year indicated a 21% year-over-year increase.
The Buzz: “Stewart [Butterfield] and his team have built one of the most beloved platforms in enterprise software history, with an incredible ecosystem around it,” Salesforce Chairman and CEO Marc Benioff said. “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.”
“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 Butterfield, Slack co-founder and CEO. “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.”
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