Salesforce [$CRM] announced Tuesday that it would buy Slack [$WORK] for $27.7 billion in cash and stock. If this acquisition goes through, it would mark the end of Slack’s run as an independent publicly traded company following their 2019 IPO. Consider this a milestone for Salesforce, as it’ll be their largest deal since opening the doors 21 years ago.
The deal happens to be the biggest bet among the recent run of acquisitions made by tech companies in order to capitalize on the mass transition to remote. For example, last month Adobe [$ADBE] said it planned to acquire Workfront, a workforce software management company for $1.5 billion. Other big shops are looking to make the shift into the work-from-home angle, including Asana [$ASAN], Box [$BOX], DocuSign [$DOCU], Dropbox [$DBX] and Smartsheet [$SMAR].
Slack, which was founded in 2010 by CEO Stewart Butterfield, grew quickly and has attracted—and turned down—takeover offers from the likes of Google [$GOOG], Microsoft [$MSFT] and Amazon [$AMZN]. Its valuation was about $19.5 billion when it went public last year. Slack has seen massive demand spikes during the virus as it has allowed people to communicate and collaborate with one another.
In the the past year since the virus swept the country, Slack has faced increasing competitive pressure from Microsoft. Teams, Microsoft’s collaboration product, reported 115 million daily users in October, up 50% from April. Slack hasn’t given an update on the 12 million daily users it reported last year. The company even went as far as to file a complaint against Microsoft with the European Commission, claiming Microsoft had unfairly bundled Teams with its suite of Microsoft Office work products. Microsoft has offered the software alongside Office since Teams was released in 2017.
This year, Slack’s value has risen to more than $25 billion. Salesforce, which provides marketing and sales software, among other products, has been on the prowl for acquisitions as it looks to expand. Under CEO Marc Benioff, Salesforce has gobbled up at least 60 companies, 27 of which were purchased in the last five years. The stock has climbed nearly 40% this year, valuing the company at $220 billion. Since 2010, Salesforce has had its own work collaboration product, called Chatter. Chatter has had “limited traction,” according to a Goldman Sachs report.
In February, Salesforce put up $1.3 billion for Vlocity, a mobile software provider. Last year, it bought Tableau, a data analytics provider, for $15.3 billion. Then in 2018, it grabbed MuleSoft, a data integration company, for $6.5 billion, and in 2016, it bought Demandware, an e-commerce software maker, for $2.8 billion. It also invested $250 million in the data warehousing company Snowflake [$SNOW] just before it went public in September.