Salesforce to acquire Slack for USD27.7 billion

Salesforce.com is acquiring work-chatting service Slack for USD27.7 billion, by far the largest technology deals  in Salesforce 21-year history. The deal will give the corporate software giant a popular workplace-communications platform a better shot at competing against Microsoft.

Salesforce ownership will mark a new era for Slack, a tech upstart with the lofty goal of trying to replace the need for business emails. The cloud-software giant may be able to sell Slack’s chatroom product to existing customers around the world, making it even more popular.

The San Francisco company was one of the first to begin selling software as a subscription service that could be used on any Internet-connected device instead of the more cumbersome process of installing the programs on individual computers.

According to Salesforce founder and CEO Marc Benioff,  Salesforce and Slack will shape the future of enterprise software and transform the way everyone works in the all-digital, work-from-anywhere world. He hailed the combination as “a match made in heaven”.

Software as a service has become an industry standard that has turned into a gold mine for longtime software makers. Microsoft for one has developed its own thriving online suite of services, known as Office 365, which includes a Teams chatting service that includes many of the same features as Slack’s 6-year-old application.

In July, Slack filed a complaint in the European Union accusing Microsoft of illegally bundling Teams into Office 365 in a way that blocks its removal by customers who may prefer Slack. Microsoft also has been posing a threat to Salesforce’s main products, a line-up of tools that help other companies manage their customer relationships.

Benioff left no doubt he considered the deal to be a major coup, after losing out to Microsoft in 2016 when the two companies were both vying to buy the professional networking service LinkedIn.

Salesforce has been building on its success in recent years to diversify into other fields, largely through a series of acquisitions that included its previous largest deal, a USD15.7 billion purchase of data analytics specialist Tableau Software last year.

Many of the deals have been financed with Salesforce’s stock, which is worth nearly seven times more than it was a decade ago to lift the company’s current market value to USD220 billion.

Slack, on the other hand, has not proven as popular with investors, even though its service that publicly launched in 2014 is being increasingly used by companies and government agencies looking for more nimble alternatives than email.

Before news reports of a potential deal with Salesforce surfaced, Slack’s stock was still hovering around its initial listing price of USD26 when the company went public nearly 18 months ago.

According to Forrester Research, this is a stellar exit strategy for Slack, adding that “Microsoft Teams is eating Slack’s lunch.”

Stewart Butterfield, Slack’s co-founder and CEO, will continue to run the business as a Salesforce unit when the deal is completed. He said he is excited to join the company that sparked the cloud revolution, hoping this sale works out better than when another company he started, photo sharing service Flickr, was sold to Yahoo 15 years ago. Flickr got lost in the shuffle at Yahoo amid years of turmoil before it was finally sold again in 2018 to SmugMug.

Slack and Salesforce are headquartered about a block away from each other in San Francisco. Slack’s office is in the shadow of the 62-storey Salesforce Tower, the city’s tallest building. If all goes smoothly, the two companies hope to close the deal and combine forces sometime between May and July next year.