The advanced talks to buy Slack Technologies by Salesforce would merge the giant in business software with a gleaming newcomer on a mission to change how we look at office email. Slack could gain access to additional sales and marketing horsepower and new inroads to enterprise customers if reports of its acquisition by Salesforce materialize. This deal will mark Salesforce’s largest acquisition ever. It is most likely to value Slack at more than $17 billion.
According to CNBC, this deal could be announced on Tuesday afternoon. It will most likely value Slack at a premium to its current share price. On Monday morning, Slack got valued at $24 billion. $17 billion more than the first time when the Wall Street Journal reported it. This first half of the year, Salesforce spent close to $4.6 billion on sales and marketing.
So, how big of a deal would this be for Salesforce?
It’s important to understand why Salesforce wants to acquire Slack in the first place. Salesforce has been working in the enterprise collaboration space, for almost a decade now. However, it has not released a single product that puts it on the same page with its larger counterparts, including Cisco CSCO, Microsoft MSFT, and Google GOOG.
Salesforce’s most notable contribution to enterprise collaboration was its Chatter application. However, it was mostly unsuccessful in competing with the growing calling, chat, and video tools such as Microsoft’s Teams and Zoom. Both of which became popular during the Covid-19 as a significant catalyst in the work-from-home scenario.
A new competitor
With the Slack and Salesforce collaboration, the productivity suite starts taking shape. It offers Salesforce customers choice in the category and will provide tough competition to companies like Microsoft and Google. This deal will also test the longstanding rivalry between Microsoft and Salesforce in the larger market for cloud applications and business.
Microsoft has a classic tech love and hate relationship with Salesforce. They have been partnering on some fronts but are also often seen competing with each other on the others. In 2016, Microsoft beat Salesforce in the bidding and struck a deal to buy LinkedIn for $26 billion. After which, the CEO of Salesforce, Marc Benioff, asked regulators to look into the antitrust implications.
It is evident that Salesforce is looking at Slack’s present situation as an opportunity to acquire well-known software. Slack has failed to keep up with its promise since going public.
Slack’s shares reflected a sluggish growth when they were trading at less than $30. With lower acquisition rates than its competitors and slow momentum, their path to profit didn’t work out. The speed at which Microsoft was succeeding, only made it worse.
Build the stack
While this deal enhances Salesforce’s competitiveness, it isn’t the last big move Salesforce will need to make if it genuinely wants to increase its competitiveness as an enterprise platform.
Salesforce needs to fully understand that the absence of a cloud infrastructure offers to stack up against Oracle, Microsoft, and Google. For example, Salesforce uses preferred cloud relationships for its several apps. Azure for its Marketing Cloud and AWS for its core CRM. Not many would have expected cloud infrastructure from Salesforce. It’s an opportunity to unlock its next level of growth and perhaps its most significant challenge too.
