Salesforce To Pay More than $27 billion for Slack

This week Salesforce made a very important announcement. According to this announcement, Salesforce is buying chat software developer Slack for more than $27 billion. Importantly, through a combination of cash and stock, Salesforce is acquiring Slack for $26.79 a share and .776 shares of Salesforce. Notably, that comes to about $45.86 a share.

It is worth noting that the purchase marks one of the largest ever for the software industry. As a reminder, the biggest IBM’s $34 billion purchase of Red Hat in 2018. Also, in 2016 Microsoft acquired LinkedIn for $27 billion.

Moreover, the London Stock Exchange agreed to buy data provider Refinitiv for $27 billion in 2019. However, the deal has yet to be cleared by European regulators.

Interestingly, Salesforce spent $15.3 billion on data visualization company Tableau in 2019. Moreover, in 2018 the company bought Mulesoft for $6.5 billion. Importantly, the Slack deal is the latest in CEO Marc Benioff’s multiyear acquisition spree.

According to the company, the slack purchase comes to an enterprise value of $27.7 billion which takes into account shares outstanding along with debt and cash.

Salesforce and a historic deal

It is worth noting that, Salesforce is one of the most valuable software companies in the world. Interestingly, by acquiring Slack, the company is bolstering its portfolio of enterprise applications and filling out its broader software suite as it seeks new areas of growth.

As a reminder, the company’s annualized revenue surpassed $20 billion in the fiscal second quarter with a growth of 29%. However, the forecast for the full year of 21% to 22% growth would represent the company’s slowest rate of expansion since 2010. According to analysts, Slack is expected to grow 39% this fiscal year, which ends January 31, to $876.3 million.

Importantly, the acquisition will further intensify Salesforce’s rivalry with Microsoft, Its Teams chat and video service emerged as Slack’s stiffest competitor.

This is not the end of the story, as the companies are battling in several other areas. Interestingly, Salesforce is the dominant player in customer relationship management software. Microsoft is struggling to compete with the company in this area. Moreover, both companies tried to buy LinkedIn, but Microsoft was the ultimate winner.

As a reminder, Slack’s annual revenue surpassed $100 million by early 2017 and reached $400 million in 2019. Moreover, the shares debuted on the New York Stock Exchange in June 2019, through a direct listing. Salesforce made the right decision by acquiring this company.