Salesforce Buys Slack for $27.7B to Take On Microsoft

In one of the most significant tech acquisitions of 2020, CRM heavyweight Salesforce confirmed it picked up enterprise collaboration platform Slack for $27.7 billion, it’s priciest deal ever to keep up with Microsoft in an ‘all-digital, work-from-anywhere world.’

CRM heavyweight Salesforce on Tuesday announced a definitive agreement to acquire enterprise collaboration platform Slack. The business software deal is the largest ever acquisition by Salesforce, surpassing its $15.7 billion acquisition of Tableau SoftwareOpens a new window last year.

We’re thrilled to be acquiring Slack!
Combining @SlackHQOpens a new window with #Customer360Opens a new window will be transformative, creating the operating system for the new way to work. Together, we’ll enable companies to succeed in the all-digital, work-from-anywhere world.

Important: pic.twitter.com/xcPH5hRb6JOpens a new window

— Salesforce (@salesforce) December 1, 2020Opens a new window

Co-founded by Flicker founder Stewart ButterfieldOpens a new window , Slack is a cloud and channel-based communications platform, which arrived in the enterprise collaboration space in 2013. It quickly became a developer favorite with its open APIs and integration capabilities.

The buildup to Salesforce’s acquisition of Slack surfaced at the start of 2020 when Microsoft began chipping away at Slack’s market share during the pandemic. Since it went public just over 18 months ago, Slack’s valuation also fell considerably this year, despite its fundamentals remaining strong. When COVID-19 struck, the battle to ace the business collaboration realm heated up, but Slack couldn’t capitalize on the collaboration boom. In comparison, other heavyweights such as Microsoft, Zoom, and Cisco continued to expand their user base with a raft of features and roll-outs.

And then there’s the antitrust complaint filed against Microsoft in the European Union by Slack, which further highlighted the divide. Slack alleged that the bundling of Microsoft Teams with the much widely used Office 365 is an anti-competitive practice that aims to ‘remove the impetus for new users to even try SlackOpens a new window .’ The numbers spell how Slack failed to capture the momentum — Teams notched 115 million daily active users in October 2020, jumping from 75 million in April, while Slack had over 12 million in March.

Interestingly, Microsoft aimed at acquiring Slack in 2016, but the deal didn’t come through. Presently, Slack’s ecosystem of apps and integrations for real-time and asynchronous collaboration with internal and external parties makes it ideal for Salesforce, which maintains an array of enterprise software solutions. “This is a match made in heaven,” said Marc BenioffOpens a new window , CEO at Salesforce.

Salesforce buying Slack makes a lot of sense for both companies.

— Andrew Yang🧢🗽🇺🇸 (@AndrewYang) November 26, 2020Opens a new window

Benioff adds, “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.”

The acquisition is one of the more interesting ones in recent years, considering Salesforce’s rivalry with Microsoft in the cloud computing space.  Salesforce, which competes with Microsoft in customer relationship management (Salesforce CRM vs. Dynamics 365), business and data analytics (Tableau vs. Power BI) believes Slack can fulfill the role it envisioned for its homegrown communications app Chatter.

Gregg JohnsonOpens a new window , Vice President of Product Management for Chatter from 2010 to 2013, told Bloomberg QuintOpens a new window , “Marc has always had a vision for having Salesforce ultimately touch all employees in a company, not just people in sales, service and marketing. We never achieved that goal with Chatter. Chatter was still largely a tool for sales, service and marketing users, whereas Slack has achieved mass-market adoption across every department of a company.” Thus, Salesforce will broadly aim to streamline collaboration on its range of enterprise software products and services.

The acquisitions also spotlights the shift towards rich, real-time and messenger-based communications. Shane Murphy-Reuter, SVP of Marketing at IntercomOpens a new window told Toolbox, “Strong customer relationships are more important than ever, but the scale and nature of online business means it’s harder to build them. COVID-19 has made matters worse as the volume of customer conversations have increased, customer expectations are higher than ever, and businesses have been forced to be more digital than ever before. Conversational solutions like conversational support help businesses meet modern customer expectations and improve support teams’ efficiency. With conversational support, support teams no longer have to sacrifice the customer experience for greater efficiency – they get both. Conversational support is the next generation way to give customers the personalized, fast, convenient help they expect.”

Though some users on Twitter aren’t too pleased with the acquisition.

I like Slack a lot but not Salesforce. With each acquisition, they increasingly feel like rudderless bloatware. I’ll reserve judgement here though, as Salesforce recently acquired another favorite of mine, Tableau, and that seems to have gone fine thus far. Still, not optimistic.

— Pastor of Muppets 🧢 (@PastorofMuppet7) November 26, 2020Opens a new window

Having worked with @salesforceOpens a new window a reasonable amount, I look forward to slack becoming an un-navigable mess with APIs that baffle literally everyone, including the original creators!

— Viscous Fluids (@viscousfluids) December 2, 2020Opens a new window

Butterfield, who will continue to serve as the Slack CEO after the acquisition, said, “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. 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’s acquisition of Salesforce is a cash and stock deal that pays out $26.79 in cash and 0.0776 shares of Salesforce common stock for each Slack share. The agreement is expected to close in the second quarter of Salesforce’s fiscal year 2022, subject to Slack stockholders’ approval.

Update | July 22, 2021

On schedule, Slack’s acquisition by Salesforce was completed this weekOpens a new window .

Salesforce has essentially leveled the playing field between Slack and Microsoft, which Butterfield believes is “unhealthily preoccupied with killingOpens a new window ” Slack through Teams. Slack will continue to serve existing customers while being integrated into Salesforce offerings. Thus, the advantage that Microsoft Teams had over Slack, i.e., reach, is now also with the workplace communication platform.

Benioff said, “Together we’ll define the future of enterprise software, creating the digital HQ that enables every organization to deliver customer and employee success from anywhere.” Butterfield will continue to lead Slack.

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