Salesforce is an American cloud-based software company headquartered in San Francisco, California.
Founded in 1999, the company is making its biggest acquisition in its 21-year history, by acquiring Slack for $27.7 billion, through a combination of cash and stock, according to a statement. When talks between the two companies were first reported a week before, Slack's stock went soaring by 38%.
The purchase not only marks Salesforce's biggest acquisition, as it is also regarded as one of the largest ever in the software industry.
For Salesforce, the Slack acquisition is one of CEO Marc Benioff's multiyear acquisition spree. The company already spent $15.3 billion to buy data visualization company Tableau in 2019 and in 2020, spent $6.5 billion to acquire MuleSoft.
Salesforce said the Slack purchase value takes into account shares outstanding along with debt and cash. The deal values Slack at over 24 times estimated revenue for 2021.
By acquiring Slack, a business chat service which was founded in August 2013, Salesforce is bolstering its portfolio of enterprise applications and filling out its broader software suite as it seeks growth.
Salesforce is best known for developing software for customer relationship management (CRM) service and also sells a complementary suite of enterprise applications focused on customer service, marketing automation, analytics, and application development.
In 2020, the 'COVID-19' coronavirus pandemic has boosted the demand for tools that enable people to work remotely.
And this Salesforce deal for Slack shows how competitive the collaborative software market has become.
On the company's earnings call, Salesforce CEO Benioff said that he believes the acquisition could help Slack reach its next critical stage of revenue growth.
"As you know, they're basically entering from the $1 billion to $2 billion phase, which I know extremely well, and this is a moment where we can offer a lot of value. We've been there. We've lived that life."
In a press release on Salesforce's website:
This acquisition is intensifying the rivalry between Salesforce and Microsoft.
Microsoft Teams for example. The chat, video service and collaboration tool has become one of Slack's biggest competitor.
The companies are battling in a number of other areas.
Salesforce's purchase of Tableau, makes it capable of conducting business in the data visualization market. This makes Salesforce a competitor to Microsoft's Power BI. The companies also go head-to-head in productivity software.
Amid the coronavirus pandemic, demand for Slack's products, which allow users to communicate and collaborate, has increased as people work from home. Slack reported that its revenue grew 39% in the three months ending with October. And this makes Slack even more attractive to Salesforce.
Benioff called this acquisition “a match made in heaven.”
Until this time, under Benioff, Salesforce has bought at least 60 companies, including 27 in the last five years, according to S&P Capital IQ.
