Cloud software company Salesforce is in talks to buy Slack, the work messaging app, in what would be one of the biggest software transactions to date, according to people familiar with the matter.
An announcement could be made early next week, one person close to the deal said.
Marc Benioff, the founder and chief executive of Salesforce, has been on a hunt for acquisitions for some time and has been looking at several targets, said another person briefed on the matter.
Shares in Slack were up 22 per cent after The Wall Street Journal first reported that the two companies had discussed a deal, sending the company’s market value above $20bn. Salesforce’s dropped about 3 per cent on the news.
Salesforce has been among the big winners of the coronavirus pandemic due to a surge in cloud software spending. By contrast, Slack — an app used by workers both to collaborate and access other cloud applications — has failed to catch this year’s ‘work from home’ wave, leaving its shares lagging behind rivals in the red-hot cloud software sector.
An acquisition would strengthen Mr Benioff’s efforts to challenge Microsoft to become the leading cloud software provider for office workers, making Slack a “front end” for Salesforce users to tap into the company’s applications, including its core customer relationship management service.
Microsoft’s Teams — built as a rival to Slack — has become a window into the software group’s other applications, including its CRM software, potentially giving it a way to outflank Salesforce.
Salesforce’s shares have more than doubled since the pandemic struck the US in early March, sending many office employees to work from home and prompting businesses to digitise their operations.
Shares in Slack, which came to Wall Street through a direct listing last year, have lagged following two quarters of disappointing earnings. Before news of the talks with Salesforce, they were trading 23 per cent below their closing price on the first day of trading last year, despite a 78 per cent surge in the cloud software sector this year.
Stewart Butterfield, Slack’s co-founder and chief executive, will have a big say over the outcome of the talks. Under a special class of supervoting shares he has personal control over about 42 per cent of the votes in Slack, thanks to his stake in the company and voting agreements with other investors.
Salesforce has been very acquisitive in recent years. It acquired Tableau Software, which makes data analytics software, for about $16bn in 2019 and a year earlier the company took over network software maker Mulesoft for $6.5bn.
However, in August this year, Mr Benioff indicated that high valuations for software companies were making it difficult for companies to strike deals. “For a company like Salesforce we don’t really see an M&A environment,” he said on a call with analysts.
A considerable portion of the offer to buy Slack is likely to be in shares as Mr Benioff would want to use Salesforce’s own rich market valuation as currency to do the deal, said a person briefed on the matter.
Additional reporting by Miles Kruppa in San Francisco
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