Another big-time tech merger could be on the horizon soon. Despite the effects of the pandemic, investors have seen more than their fair share of big buyouts, especially since some of these companies are trading at a discount compared to where they were last year. Salesforce (NYSE: CRM) announced that it’s planning to buy out communications app maker Slack Technologies (NYSE: WORK) for around $17 billion.
According to anonymous sources, Salesforce is already in advanced talks about a potential buyout, with a deal possible even being signed within the next few days. Some speculate that the announcement could take place on Tuesday, the same day Salesforce is scheduled to report its Q3 results. If the buyout is agreed upon after all, it would mark the single largest acquisition undertaken by Salesforce in its entire history.
The last time Salesforce made a deal this big was last year, where it paid out $15 billion to acquire a data-analytics company called Tableau Software. Back in 2016, Salesforce even flirted with the idea of buying out LinkedIn as well as Twitter, although shareholders found the idea far too much to pull off.
“This would be a game changer move for Benioff & Co. to further build out its collaboration engine and product footprint as cloud spending ramps across the enterprise,” said Wedbush Securities’ Dan Ives in an interview with CNBC, referring to Salesforce’s CEO Marc Benioff.
Slack has done exceptionally well so far this year, with demand for its products exploding due to the rise of remote working arrangements now becoming the norm. Shares have roughly doubled since the start of the year, although the same excitement seems to have tapered off in recent months leading up to this announcement.
Financially, Slack is doing better than ever. New installations of its app jumped to 1.8 million in March, a 50% increase from the previous year. Slack’s main competitor in this market is Microsoft, which has its own team communication app called “Teams.”
Last year, Slack had approximately 12 million daily active users, in comparison to the 115 million daily users Team supposedly had around the same time. Slack has managed to close the gap somewhat, but it’s still smaller than Microsoft’s alternative. However, getting bought out by Salesforce would expand the company’s list of potential users quite significantly.
Shares of Salesforce were down around 5.4% following the news, which is typical. Most companies that are doing the buying end up dipping a bit in the markets. On the other hand, shares of Slack were surging, with the company’s stock price jumped 35.6%. Overall, analysts and investors seem to agree that this buyout is excellent news for Slack, which has potentially much more to gain from this relationship.
Salesforce Company Profile
Salesforce.com provides enterprise cloud computing solutions, including Sales Cloud, the company’s main customer relationship management software-as-a-service product. Salesforce.com also offers Service Cloud for customer support, Marketing Cloud for digital marketing campaigns, Commerce Cloud as an e-commerce engine, the Salesforce Platform, which allows enterprises to build applications, and other solutions, such as MuleSoft for data integration. – Warrior Trading News
