Cloud computing giant Salesforce is acquiring workplace chat app Slack, the two companies announced on Tuesday. The deal, rumblings of which began surfacing last week, marks one of the most consequential acquisitions in the business software industry in recent years and Salesforce’s biggest purchase ever.
Salesforce is paying $27.7 billion for Slack, according to the press release. “Under the terms of the agreement, Slack shareholders will receive $26.79 in cash and 0.0776 shares of Salesforce common stock for each Slack share, representing an enterprise value of approximately $27.7 billion based on the closing price of Salesforce’s common stock on November 30, 2020,” the announcement reads.
“Stewart and his team have built one of the most beloved platforms in enterprise software history.”
“Stewart and his team have built one of the most beloved platforms in enterprise software history, with an incredible ecosystem around it,” said Salesforce CEO Marc Benioff. “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 Slack CEO Stewart Butterfield. “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.”
Slack has transformed from a fast-rising startup formed as a gaming company in 2009 into a major competitor of Microsoft with more than 12 million daily active users as of October of last year (and likely many more now, though the company has not disclosed concrete numbers) and a market value of close to $25 billion. The company, led by Flickr co-creator Butterfield, started primarily as an email alternative that pitched itself to startups, media companies, and other tech-savvy businesses to better manage interoffice communication.
But Butterfield and his team grew Slack into a full productivity suite with video meeting features, file hosting, IT administration, and all manner of other features typically offered by large enterprise corporations. Earlier this year, the company expanded its partnership with IBM to include the company’s entire 350,000-plus workforce.
However, Slack has also struggled in the face of fierce competition from not just Microsoft, but Facebook and other companies that have launched their own versions of office chat and productivity platforms. The company had lost nearly half of its market value since going public in April 2019, and it failed to turn a profit during its last three quarters despite the surge in remote work due to COVID-19. The company did not have an obvious path to becoming profitable and no clear way to overcome increasing pressure from Microsoft Teams, making a potential acquisition more likely with each passing quarter.
Salesforce, also a major competitor to Microsoft but in the cloud sector, is worth nearly $220 billion and has grown to become one of the largest software companies on the planet, thanks to its customer relationship management software that helps businesses manage sales online.
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. Yet, unlike Slack, which has seen a rollercoaster of climbs and steep drops in its stock price, Salesforce has only seen its market valuation expand in recent months. Its shares peaked at an all-time high in September. Salesforce and Slack joining together ensures both platforms can better compete against Microsoft, Oracle, and other cloud and enterprise companies in the future.