Salesforce goes social with Slack acquisition

The company is betting $28 billion on remote working

Salesforce has entered into a definitive agreement to acquire popular workplace communication tool Slack, for about $27.7 billion.

Rumours of the deal had initially surfaced last week, causing a spike in Slack's stock price.

The deal is by far the largest in Salesforce's history. Under the terms of the agreement, Salesforce will give Slack shareholders $26.79 in cash and 0.0776 shares of Salesforce common stock for each Slack share.

Stewart Butterfield, Slack CEO and co-founder, will continue to lead the company as an operating unit within Salesforce. Both firms expect the deal to close in mid-2021.

"This is a match made in heaven," said Marc Benioff, the founder and CEO of Salesforce. "I'm thrilled to welcome Slack to the Salesforce Ohana once the transaction closes."

Benioff described Slack as "one of the most beloved platforms in enterprise software history," and said the new partnership will help to "shape the future of enterprise software and transform the way everyone works in the all-digital, work-from-anywhere world".

Click here for Delta's report on the unified communications market

Salesforce plans to integrate Slack with its Salesforce Customer 360 software.

"As the new interface for Salesforce Customer 360, Slack will transform how people communicate, collaborate and take action on customer information across Salesforce as well as information from all of their other business apps and systems to be more productive, make smarter, faster decisions and create connected customer experiences," Salesforce said.

Analysts believe that the merger will help both firms to compete against long-time industry powerhouse Microsoft, whose Teams collaboration tool is a direct challenger to Slack.

In July, Slack filed a complaint in the European Union (EU) accusing Microsoft of illegally bundling Teams into Office 365 - its online suite of services. Slack said that Microsoft is restricting Teams removal by customers who may prefer Slack.

Last year Microsoft barred its staff from using Slack, AWS and the Google Cloud over security issues. While the company admitted that Slack Enterprise Grid was acceptable in terms of security, the employees were advised to use Microsoft Teams rather than "competitive software".

According to analysts, Slack has struggled in the face of fierce competition from Google, Facebook, and other tech giants who have introduced their own versions of office productivity and chat tools. The firm has lost nearly half its market value since going public in April 2019.

On the other hand, Salesforce, which is also a major rival to Microsoft in the cloud sector, is worth about $220 billion. The company is known for its customer relationship management (CRM) software, which helps firms manage sales online. The company's market valuation has grown in the pandemic, with its shares peaking at an all-time high in September.

Last year, Salesforce acquired BI and analytics firm Tableau for $15.7 billion, to add a more advanced analytics element to its existing cloud-based CRM services, particularly in combination with the AI platform Salesforce Einstein.

The company also acquired ClickSoftware in 2019 in a $1.4 billion cash and stock deal to "accelerate the growth of Service Cloud" and to "drive further innovation with Field Service Lightning to better meet the needs of customers."