For the past few days, reports that Salesforce had been in talks to buy Slack were everywhere. On Monday, it became clear that the two companies were likely to announce a deal when the market closed on Tuesday. The only real question would be how much Salesforce was willing to spend.
Now we know.
As expected, the companies announced yesterday that Salesforce would pay $27.7 billion, totaling $11.6 billion in cash and the rest in stock. That's a more than 60 percent premium over Slack's stock price the day the news first broke that the companies were talking about a deal.
While the numbers are definitely big, it's not a surprise. I previously suggested that even a price in that range is a steal for Salesforce. I'll get to that in a minute, but first I think it's worth looking at what Salesforce's founder and CEO, Marc Benioff says are the two reasons why it made so much sense: "Stewart and his team have built one of the most beloved platforms in enterprise software history, with an incredible ecosystem around it."
That's actually a great way to look at what could be one of the more consequential software company acquisitions in a long time. It's certainly Salesforce's largest, and probably most important for a variety of reasons.
That's because the two companies have a common enemy--Microsoft--which poses an existential threat to both, though for different reasons. The combination gives Salesforce a weapon to counter Microsoft's growing dominance with corporate customers. It also gives Slack the development resources, as well as the marketing and sales chops it needs to expand in the fast-growing team collaboration space.
Of course, all of that is true, but what Benioff talked about wasn't about the software, it was about the company. He didn't talk about the number of daily users or how much the company would add to the bottom line. Certainly, those were very real considerations, and there's no doubt Benioff and his team at Salesforce have studied all of the numbers.
But in public, Benioff talked about how Slack had built "one of the most beloved platforms."
It would be easy, especially when talking about a deal worth almost $28 billion, to overlook something like the way the people who use a piece of software feel about it, but it's important. For example, I connected with two-time Inc. 500 founder and CEO, Dave Waring, who said:
A large portion of our team is remote, which made maintaining a cohesive culture as we grew extra challenging. Getting everyone at the company on Slack where we can set up channels for different topics and teams to communicate and collaborate openly at scale helped us bring back the magic we had when we were a smaller company. I count our company among those where Slack is a beloved platform for this reason.
I think that really highlights why many businesses, especially those who are trying to build a positive culture among their remote teams, have grown attached to Slack's platform. It isn't just about the software, but about how it helps teams stay engaged and connected.
Second, Benioff talked about Slack's "incredible ecosystem." One of the reasons Slack is so popular is that while it's a standalone software tool, it easily integrates with so many other apps. Slack makes it relatively easy for developers to create those integrations, and even easier for users to set up the tools you use.
Ultimately, Slack wants to be the de facto place where your team collaborates. Microsoft Teams is trying to do the same thing. Both want to be the centralized place not just for conversations but where your team creates documents, collaborate on projects, and get important notifications from every other app they use.
In the company's announcement, Salesforce said:
Slack will be deeply integrated into every Salesforce Cloud. As the new interface for Salesforce Customer 360, Slack will transform how people communicate, collaborate and take action on customer information across Salesforce as well as information from all of their other business apps and systems to be more productive, make smarter, faster decisions and create connected customer experiences.
Those things together, the platform and the ecosystem, represent two important aspects of any company. Really, it's a measure of the people who use whatever it is you make, and the partners you work with to add value to the experience. It's a measure of the relationships.
Slack may not be the biggest company competing in its space, but clearly, it has invested in those relationships. In the end, it's hard to put a price on that.
Well, in Salesforce's case, it just did: $27.7 billion.