Slacking? Not Anymore: Salesforce to acquire Slack marking a win-win deal

December 18, 2020

3 min read

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What's going on here?

Salesforce has announced it will buy Slack for $27.7bn (around £20bn), marking one of the largest tech acquisitions in recent years.

What does this mean?

Amid 2020’s ‘work from home boom’ triggered by the Covid-19 global pandemic, another significant acquisition has occurred. This time, Salesforce, a cloud-based software company specialising in customer relationship management has agreed to purchase Slack, a business communication platform and app. This mega-deal beats Microsoft’s purchase of LinkedIn in 2016.

To Salesforce CEO and co-founder Marc Benioff, this is ‘a match made in heaven’ that Benioff hopes will ‘transform the way everyone works in the all-digital, work-from-anywhere world’, with Slack CEO Stewart Butterfield concurring that ‘this is the most strategic combination in the history of software’. The grouping of the two companies will enable companies to access Salesforce’s sales, marketing and other commercial software, according to the FT.

The purchase comes at a convenient time for Slack which missed out on the cloud software boom and instead saw its share price drop in the first two quarters of 2020. With Salesforce now by its side, Slack’s CEO comes out strong from the deal with a $1.9bn stake.

In addition, the acquisition demonstrates Salesforce’s diversification of its purchases which, before Slack, saw the company branch into artificial intelligence and e-commerce, including the purchase of data visualisation company Tableau Software for $15.7bn in 2019. 

This is therefore a win-win deal for the two tech companies. Nevertheless, Salesforce’s reputation for paying big premiums in such deals has resulted in billions of dollars being slashed from the company’s value.

What's the big picture effect?

The Covid-19 global pandemic has seen several businesses find creative solutions to financial difficulty. Due to numerous companies adapting well to a shift online and remote work being predicted to rise to 300% of pre-Covid-19 levels (as stated by Forrester here), many have identified pricey city-centre office space as an ideal starting point for cost-cutting. Especially as many believe that coronavirus will permanently alter traditional office use. This means that every-day office conversations have had to move online, greatly benefiting companies such as Slack, and particularly Zoom and Microsoft Teams.

However, the shift to working from home also brings risks which lawyers will not only have to help their clients navigate but will also have to adapt safely to themselves. As more companies rely on software offered by companies such as Slack and Salesforce, cyber security and data protection risks increase. The Law Society have published a practice note on this (here), recommending that users of such software should ensure data protection and client confidentiality by undertaking rigorous risk and compliance analysis. The focus on this type of advisory work for law firms is likely to increase rapidly.

In addition to the potential risks that lawyers will help clients navigate, the growing trend in tech-related acquisitions presents plenty of opportunities of law firms. Significant advisory work in this field is likely to increase in 2021, as 2020 saw other major deals such as Nvidia’s $40bn acquisition of ARM Holdings and Facebook’s $1bn purchase of start-up Kustomer.

This Salesforce-Slack deal will allow arch rivals Salesforce and Microsoft to compete on a more even playing field, particularly in relation to Slack’s major competitor Microsoft Teams, which Slack filed an antitrust complaint against in July 2020 (see our article on this here). According to the FT, six out of nine of the largest cloud software purchases can be attributed to Microsoft and Salesforce. As the cloud software sector continues to consolidate, only time will tell which key competitor will come out stronger.

Report written by Edie Essex Barrett 

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