Salesforce Nears A Major Acquisition

Business slacks have had close to zero practical value in 2020. That’s not the case here.

You may have seen the headline before Turkey Day: Slack Technologies, the fast-growing business communication platform, is nearing a deal to be acquired by software powerhouse Salesforce.

According to the WSJ, the deal may be announced as early as tomorrow.

Cutting Slack

On the surface, Slack appears tailor-made for a pandemic:

  • Its chat software is used by companies to improve collaboration and it’s been hailed as an “email killer” for years.
  • New Slack downloads hit a record high of 1.8 million in March and overall installations are up over 50% vs. 2019.

But relative to other work-from-home stocks such Zoom or Peloton, Slack’s share price performance has been…dare we say…slacking. As of last Tuesday, Slack shares were trading under $30, well below the high of $42 they reached on the first day of trading last year.

Deal Rationale: For Salesforce, Slack’s relative underperformance has created an opening for an attractive-ish entry point. If completed, the deal would be a major step into Microsoft’s territory of offering “wall-to-wall” software solutions used for everything from sales, to data analysis, to collaboration.

Unpacking The History

The relationship between Microsoft and Salesforce has a long and rocky history.

Microsoft was in talks to acquire Salesforce five years ago, but talks fell apart due to differences in price expectations.

One year later, Microsoft outbid Salesforce to acquire LinkedIn for $26 billion. The fallout wasn’t pretty – Salesforce plied antitrust regulators to scuttle the deal (to no avail).

Lastly: Slack employees would be plenty happy to engage in a high-stakes rivalry with Microsoft. CEO Stewart Butterfield, describing Microsoft’s “Teams” offering, once told the WSJ, “They’re trying to kill us.”