Salesforce buys software maker Slack for $27.7 billion

Salesforce.com Inc. has agreed to buy Slack Technologies Inc. for $27.7 billion in cash and stock, giving the enterprise software giant a popular workplace communication platform in one of the biggest technology deals of the year.

The transaction, the largest acquisition ever by Salesforce, is expected to close by the end of July, the San Francisco-based company said in a statement on Tuesday. Slack investors will receive $26.78 for every company share plus 0.0776 Salesforce share – which is a 55% premium over Slack’s price on November 24, the day before the trading reports. agreement between companies.

Marc Benioff, CEO of Salesforce, has orchestrated more than 60 acquisitions in 21 years, transforming his business from the dot-com era to a cloud computing titan. The Slack deal would give Salesforce, the leader in customer relationship management programs, another angle of attack against Microsoft Corp., which has itself become a major force in internet-based computing. One of Slack s major competitors is Microsoft’s Teams product, which offers a workplace chat room, automation tools and video conferencing hosting.

Together, Salesforce and Slack will shape the future of enterprise software and transform the way everyone works in the fully digital world and from anywhere, Benioff said in the release.

Stewart Butterfield, co-founder and CEO of Slack, will continue to run the business as a Salesforce unit after the transaction is completed. He said he was excited to join the company that sparked the cloud revolution.

The opportunity we see together is huge, Butterfield said in the statement. This is the most strategic combination in software history, and I can’t wait to go.

Salesforce shares were down about 4% under extended trading after the close at $241.35. The stock has jumped 48% this year. Slack shares were little changed after the close at $43.84. The stock nearly doubled in 2020, with about half of that gain since the publication of acquisition negotiations.

Salesforce, one of the first, fast-growing cloud software companies when it went public in 2004, strives to generate revenue increases of over 25% year-over-year. Slack, which is expected to increase sales by nearly 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 have reported that companies such as Amazon.com Inc., Microsoft and Alphabet Inc.’s Google have expressed interest in buy Slack multiple times while still private.

Benioff has for years turned to acquisitions to keep his product line fresh. It has set an annual revenue target of $35 billion for Salesforce by fiscal year 2024, up from $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 largest. acquisition at the time. The year before, in 2018, Benioff had taken over MuleSoft Inc. for $6.5 billion.

Benioff, who said just three months ago that he did not plan to make any acquisitions given the economic environment, praised COO Bret Taylor for arranging the deal with Butterfield, then presented the idea to him.

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

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

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

On the other hand, Salesforce’s forecast revenue will increase by approximately 17% over the current period to $5.675 billion. It 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 certain items, will be 73 to 74 cents in the period ending in January, missing analysts’ forecasts for 86 cents.

Sales climbed 20% to $5.42 billion in the fiscal third quarter, which ended Oct. 31, the company said in a statement. Profit, excluding certain items, was $1.74 per share, compared to analysts’ average estimate of 75 cents.

The company also said chief financial officer Mark Hawkins will retire on Jan.31 and be replaced by Amy Weaver, currently president and general counsel. Hawkins will remain an advisor until October 2021, Salesforce said.

Ownership of Salesforce will mark a new era for Slack, a tech upstart with the lofty goal of trying to replace the need for business email. Perhaps the cloud-based software giant could sell Slack’s chat product to existing customers around the world, which will make it even more popular. Slack said in March it had reached 12.5 million users logged in simultaneously on its platform, which has become increasingly critical as company employees work from home during the coronavirus pandemic. . Slack increased revenue in the midst of Covid-19, but the company’s billing has been disappointing due to low demand from small and mid-sized customers.

Meanwhile, Microsoft Teams usage has surged during the pandemic, and Slack has challenged the company’s business tactics. In July, Slack complained to the European Union that Microsoft had violated antitrust law and should be investigated.

Microsoft has illegally tied its Teams product to its market-dominant Office productivity suite, forcing it to be installed for millions, blocking its removal and hiding the real cost to business customers, Slack said in a statement to the company. ‘time. Microsoft, which integrates its products with Slack, has denied any wrongdoing.

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

Bank of America Corp. acted as financial advisor to Salesforce. Qatalyst Partners and Goldman Sachs Group Inc. advised Slack.