Salesforce would have to put a lot of money on the table for Slack

Salesforce-Chef Marc Benioff

The entrepreneur is planning another big takeover.

(Foto: Bloomberg)

Düsseldorf So far this year has been disappointing for Slack shareholders. Companies like Microsoft and Zoom, which make work and life easier during the corona pandemic, have achieved new highs on the stock exchange – the provider of communication software, on the other hand, is only experiencing a special boom. The competition from Microsoft Teams makes business difficult, which is also reflected in the course.

On Wednesday, however, the share made a jump of around 37 percent: The cloud specialist Salesforce has apparently made a takeover bid for Slack, as the “Wall Street Journal” first reported and then several media confirmed. The transaction could already be concluded within the next few days, although failure is still possible, it said.

It is an offer that is surprising. On the one hand, because given a takeover price of presumably well over 20 billion dollars, one of the largest takeovers in the IT industry is emerging. On the other hand, because Salesforce is in a different business than Slack and the strategic considerations are not immediately explained – even if analysts can certainly see advantages.

Salesforce is the market leader in software that companies use to maintain their customer relationships – from acquisition to service, which the industry abbreviates as CRM. Business is booming, the management raised the targets for the current year in August.

The corona pandemic has made digital communication more important – most salespeople are now working from home or at the kitchen table. The San Francisco-based company has therefore introduced solutions such as “Anywhere” and “Meetings” to facilitate internal exchange.

Slack could make it possible to network a sales department directly with customers: The “Connect” function has enabled communication across company boundaries, for example in projects, since the summer. As one scenario, CEO Stewart Butterfield told the specialist portal “Diginomica” a complex sales process in which employees from different departments are involved: When exchanging information via Slack, he argues, management can keep track of things better.

That alone is unlikely to justify such an expensive takeover. Even if Salesforce were to pay for this predominantly with its own shares, which are quoted near the all-time high. The SAP-Rivale could open up a new business area: After all, digital collaboration is important for all areas of the company. According to market researcher Gartner, sales will grow to $ 4.8 billion by 2023.

Purchase for customer loyalty

With the deal, Salesforce CEO Marc Benioff could expand the product range at a time when spending on cloud computing is increasing, Wedbush Securities analyst Dan Ives told CNBC. That would not be an unusual strategy for the manager: He has already increased sales several times in the past with takeovers, for example last year with the purchase of the visualization specialist Tableau.

Slack could also help Salesforce increase customer loyalty, says Holger Müller, an analyst at Constellation Research. Collaboration is not only important for CRM, but also for other products, for example the Work.com platform, with which Salesforce wants to help companies deal with the corona pandemic. The calculation: the more products a customer uses, the less likely it is that they will switch to the competition.

For Slack, on the other hand, Salesforce could be the partner it needs to compete with Microsoft. The company has gained many new users in the past few months, albeit significantly fewer than its powerful competitor. In June it therefore withdrew the forecast for the billings, referring to the economic uncertainty, from which new contracts and contract extensions for the software subscriptions can be read.

Shareholders therefore reacted skeptically

Slack boss Stewart Butterfield thinks a comparison with Teams and Zoom is wrong. It’s not about simply holding meetings via video, but about organizing communication differently. This “goes hand in hand with major changes in the processes and also in the culture,” the founder told Handelsblatt in October. However, competitor Microsoft is doing everything to ensure that customers do not even try Slack, he complains. His company has therefore submitted a complaint to the EU Commission.

Salesforce could help Slack with the good contacts in the corporations to convince the IT departments – and thus strengthen the business, at the expense of Microsoft. This shows that if the takeover takes place, competition between the corporations is likely to intensify.

However, the cloud specialist would have to pay a high price. The shareholders therefore reacted skeptically, the price of the Salesforce share fell on Wednesday by more than five percent. It was “the wrong goal, at the wrong time,” said Evercore ISI analyst Kirk Materna in a letter to customers. There are some strategic reasons for the combination, but from the point of view of most investors it is about the purchase of sales, he wrote.

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