-By Josh Abraham, London School of Economics
Value: US$27.7 billion
Announced date: December 1st, 2020
Closed date: July 21st, 2021
Financial Advisors: BofA Securities Inc. for Salesforce, Qatalyst Partners LP and Goldman Sachs & Co LLC for Slack
Legal Counsel: Wachtell, Lipton, Rosen & Katz and Morrison & Foerster LLP for Salesforce, Latham & Watkins LLP and Goodwin Procter LLP for Slack
Acquiring company: Salesforce
Salesforce is a customer relationship management (CRM) giant and software company, allowing for interaction between businesses and its existing and potential customers, via sales, commerce and marketing.
CEO: Marc Benioff
Number of Employees: 49,000
Market cap: $201.44 billion
Enterprise Value: $197.79 billion
LTM Revenue: $20.29 billion
LTM EBITDA: $2.84 billion
Target company: Slack
CEO: Stewart Butterfield
Number of Employees: 2,045
Market cap: $24.44 billion
Enterprise Value: $23.71 billion
LTM Revenue: $0.83 billion
LTM EBITDA: -$0.27 billion
Slack’s impressive growth of its platform and in customer usage since its launch initially placed the company as a new competitor to cloud giant Microsoft. However, the company’s valuation plummeted by 40% since the opening day of its direct listing on the NYSE in 2019, and the company reported a net loss of US$147.6 million during the two quarters ending July 31st, 2020. A promising company valued at a fraction of its expected worth made it mutually beneficial for an acquisition.
In integrating Slack’s messaging app to the software, Salesforce is now able to enhance customer service between the company and its customers, whilst also improving communication efficiencies between its employees. The new deal also springboards Salesforce back on par with Microsoft, who Slack CEO Stewart Butterfield previously called as “unhealthily preoccupied with killing us”, particularly with the surge in usage of its Teams product (largely down to lockdowns and working from home) which was a direct substitute for Slack’s services. However, arguably most importantly, the acquisition allows Salesforce to adapt to the current reliance on digital services, with the company speeding up efforts to build a more rounded platform, as explained by Salesforce COO Bret Taylor.
RISKS AND UNCERTAINTIES
The main downside to this acquisition is the lack of synergies, both in the services offered, and the target user. Salesforce’s previously successful acquisitions, including ExactTarget’s email marketing service ($2.5 billion) and Demandware’s e-commerce platform ($2.8 billion), were all of services that could be easily integrated to its CRM software. On the other hand, Slack’s software is best tailored to mainstream company employees – a stark contrast to Salesforce’s user demographic of sales, marketing and business analysts.
It remains to be seen, therefore, whether this deal will benefit Salesforce in the long run.