Salesforce CEO Marc Benioff says the Slack Connect digital communications application will integrate with the Salesforce suite of cloud-based ecommerce, marketing, sales, service and analytics software to help companies better serve their customers. Salesforce has agreed to acquire Slack for $27.7 billion.

(Bloomberg) Salesforce.com Inc. agreed to buy Slack Technologies Inc. for $27.7 billion in cash and stock, giving the corporate software giant a popular workplace-communications platform in one of the biggest technology deals of the year.

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.
Marc Benioff, chairman and CEO
Salesforce.com Inc.

The transaction, Salesforce’s largest-ever acquisition, is expected to close by the end of July, the San Francisco-based company said Tuesday in a statement. Slack investors will receive $26.78 for each company share as well as 0.0776 share of Salesforce—representing a 55% premium to Slack’s price on Nov. 24, the day before reports about deal talks between the companies.

MarcBenioff-Salesforce

Marc Benioff, chairman and CEO, Salesforce.com Inc.

Salesforce chairman and CEO Marc Benioff has orchestrated more than 60 acquisitions in 21 years, taking his company from dot-com era upstart to a titan of cloud computing.

The Slack deal would give Salesforce, the leader in programs for managing customer relationships, another angle of attack against Microsoft Corp., which has itself become a major force in internet-based computing. Microsoft’s Teams product, which offers a workplace chatroom, automation tools and videoconference hosting, is a top rival to Slack.

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“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,” Benioff said in the statement.

Slack’s ‘end-to-end’ role in serving customers

In a third-quarter earnings call with investment analysts this week, Benioff said the Slack Connect communications tool will integrate with Salesforce’s Customer 360 suite of sales, service, marketing, ecommerce, and analytics software to help companies better connect with their customers. Asserting that such operations as ecommerce, marketing and customer service are “not siloed by department anymore,” Benioff said businesses today need to manage customer relationships in an “end-to-end journey and to really achieve that, we think Slack is a good tool that facilitates that in a really unique way.”

StewartButterfield-SlackTechnologies

Stewart Butterfield, CEO, Slack Technologies Inc.

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.

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“The opportunity we see together is massive,” Butterfield said in the statement. “This is the most strategic combination in the history of software, and I can’t wait to get going.”

Salesforce’s shares declined by about 4% in extended trading after closing at $241.35. The stock has jumped 48% this year. Slack’s shares were little changed after closing at $43.84. The stock has almost doubled in 2020, with about half of that gain coming since the acquisition talks were reported.

Salesforce, among the first of the fast-growing cloud software companies when it went public in 2004, strives to generate year-over-year revenue increases of more than 25%. Slack, which is expected to increase its sales by almost 40% to $877 million this fiscal year, could help that effort. Slack, launched in 2013, went public via a direct listing in 2019. Bloomberg News and other publications reported that companies including Amazon.com Inc., Microsoft, and Alphabet Inc.’s Google expressed interest in buying Slack at various times when it was still private.

Benioff for years has turned to acquisitions to keep his product lineup fresh. He has set an annual revenue goal of $35 billion for Salesforce by fiscal 2024, compared with $17 billion in fiscal 2020. The company bought analytics firm Tableau Software Inc. in an all-stock deal valued at $15.3 billion last year, which was Salesforce’s biggest acquisition at the time. The year before, in 2018, Benioff took over MuleSoft Inc. for $6.5 billion.

A new era for Slack under Salesforce

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. Slack said in March that it had reached 12.5 million users who were simultaneously connected on its platform, which has grown more essential while corporate employees work from home during the coronavirus pandemic. Slack has boosted revenue in the midst of Covid-19, but the company’s billings have been underwhelming because of shaky demand from small and mid-sized clients.

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Meanwhile, use of Microsoft Teams has jumped during the pandemic, and Slack has taken issue with the company’s business tactics. In July, Slack complained to the European Union that Microsoft had broken antitrust law and should be investigated.

“Microsoft has illegally tied its Teams product into its market-dominant Office productivity suite, force installing it for millions, blocking its removal, and hiding the true cost to enterprise customers,” Slack said in a statement at the time. Microsoft, which integrates its products with Slack, has denied any wrongdoing.

While the boards of both companies approved the deal, Slack will be required to pay Salesforce $900 million if Slack’s directors change their recommendation or back out to accept a “superior proposal,” according to a regulatory filing.

‘Facilitating this all-digital, work-from-anywhere world’

Benioff, who just three months ago said he didn’t foresee making any acquisitions given the economic environment, praised chief operating officer Bret Taylor for organizing the deal with Butterfield, then pitching him on the idea.

“What’s very exciting is this vision that Stewart and Bret have put together,” he said in a conference call. “It’s a wow.”

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Taylor, who sold his productivity software company, Quip, to Salesforce in 2016, said Slack will be deeply integrated with the app maker’s software suite to help its customers’ employees.

“It really is about facilitating this all-digital, work-from-anywhere world, to enable team selling, to enable people in a contact center to swarm on a case digitally whether or not you’re in the same building, to enable marketers to plan a campaign,” Taylor said.

Separately, Salesforce projected revenue will grow about 17% in the current period to as much as $5.675 billion. That will be the slowest quarter of year-over-year sales growth in 11 years for the software maker, according to data compiled by Bloomberg. Profit, excluding some items, will be 73 to 74 cents in the period ending in January, missing analysts’ projections for 86 cents.

Marketing and commerce software revenue up 25%

Salesforce reported this week a 20% year-over-year gain in revenue to $5.42 billion for its fiscal third quarter ended Oct. 31; net income, benefitting from changes related to strategic investments and income tax, was $1.08 billion, compared with a year-earlier loss. For the nine months ended Oct. 31, revenue increased by 26% to $15.44 billion, as net income reached $3.81 billion.

The company said revenue from its Marketing and Commerce Cloud technology, which includes its B2B and B2C ecommerce software, increased 24.8% in Q3 to $804 million and by 24.3% in the first nine months to $2.26 billion.

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The editorial staff of Digital Commerce 360 contributed to this report.

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