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Salesforce agreed on Tuesday to buy Slack for $27.7 billion, combining two powerhouses in business software.
The deal is the largest acquisition ever by Salesforce, whose core product helps sales teams manage their customers. The company has steadily expanded into new areas, including marketing services and data analytics.
Marc Benioff, Salesforce’s CEO and chairman, described his own dependence on Slack’s instant messaging service for the office during an earnings call after market close on Tuesday. “We see Slack as a once-in-a-generation platform and company. It’s the central nervous system of so many companies on this call,” he said.
In the software industry, Salesforce’s Slack acquisition is exceeded only by IBM’s mega-purchase of cloud caretaker Red Hat for $34 billion in 2018. The runner-up would be Microsoft’s acquisition of LinkedIn for more than $26 billion in 2016.
Benioff said Salesforce’s president, Bret Taylor, and Slack’s CEO, Stewart Butterfield, approached him with the idea for a deal. Their plan: to combine Slack with Salesforce’s Customer 360 product, a central hub for Salesforce’s software services, ranging from sales to marketing, he said.
“It’s a perfect match for us both,” Benioff said, calling the combo a business “supercharger.” Collaboration tools involving chat and video “are the next big moment for our industry,” Benioff added, comparing the occasion to the development of graphical user interfaces, or icon-laden computer screens, in an earlier computing era.
Taylor echoed Benioff’s enthusiasm on the call, describing Slack as “an operating system for the new way to work.” In a statement, Butterfield echoed the laudatory praises, saying the deal represented “the most strategic combination in the history of software.”
Despite the coronavirus pandemic boosting remote work, Slack struggled in the face of competition from Microsoft, which bundles its similar Teams software with its bevy of Office 365 offerings. Slack filed an antitrust complaint against the Redmond, Wash. rival with the European Commission earlier this year.
Slack also fell behind Zoom, the pandemic’s breakout tech star. Slack’s own video collaboration tool has proven much less popular.
Slack’s share price has slumped since its public market debut in June 2019, dipping 30% since then, before Salesforce’s rumored interest last week caused its share price to rocket.
For Salesforce, the acquisition caps off a years-long string of M&A. Before Slack, Salesforce’s biggest acquisition was Tableau, a data analytics firm it bought last year for more than $15 billion. In 2018, it scooped up Mulesoft, another data play, for $6.5 billion.
Analysts expect Salesforce’s move to spur competitors—from Microsoft and Google to Oracle and SAP—to make big moves of their own in the so-called cloud collaboration industry. Earlier this month Adobe bought work management firm Workfront for $1.5 billion.
There are plenty of other potential acquisition targets. Some include Asana, Box, and Dropbox.
Aaron Levie, Box’s CEO, compared Salesforce’s bold bet to Facebook’s prescient acquisition of Instagram for roughly $1 billion in 2012 in terms of its industry-shaking significance. Salesforce “won’t blow it,” he commented on Twitter.
The deal is expected to close midway through next year, pending regulatory approval, Salesforce said.
