Late yesterday, news broke of a definitive agreement for Salesforce to buy Slack in a nearly $28 billion transaction. When it closes, the deal will deliver Slack shareholders a nearly 55% premium over where the stock has been hovering over the last year.

Hats off to Slack for building a business worth more than $27 billion. And for selling it to one of the world’s leading SaaS companies. And while we’re at it, for creating a new verb in our technology lexicon. As in, “Hey, Slack me”. Hockey fans would call this the hat trick. We analysts just call it a great move by Slack.

One Disruptor Buys Another Disruptor

By almost all accounts, Salesforce was a true disruptor when it launched back in 1999. Salesforce essentially invented the notion of sales force automation.

Here’s what we remember so vividly back then. The team at Salesforce was wildly successful in pushing large enterprise company CEOs to move to Salesforce’s CRM cloud platform. And they got the CEOs of their initial customers to drop the Salesforce name in conversations with other CEOs. Those referential comments by CEOs drove other CEOs to eventually move their licensed sales tools to the Salesforce cloud. And that word of mouth play cemented Salesforce as a major player in enterprise – and eventually – SMB software.

Back then, when you’d ask a CEO how the transition was going, you’d hear lots of superlatives. But when you’d ask the users, the front-line salespeople, they would often shake their heads and say they use it a little as possible. In that regard, Salesforce was also the first SaaS company to learn that while SaaS sales are great, actual SaaS usage is the real gold.

Salesforce’s annual Dreamforce conference.

Picking Up the Slack?

Fast forward to today’s news and you can see the potential value Slack offers Salesforce. And, perhaps even more, the value that Saleforce offers Slack. Slack’s transaction value – about 12% of Salesforce’s $220 billion — seems totally in line with the value the respective platforms deliver.

We asked a sales executive this morning about what they see as the relative use of a CRM versus a workplace messaging platform. They said that 80% of the time their sales team is inside their CRM (in this case Hubspot) and their Microsoft email client – Outlook. When I asked about Slack, their response was “well it is always on, but I bet I don’t spend more than 10 minutes a day actually in the messaging platform”.

We reached out to another sales executive, who said this. “For our reps, I would say they spend about 40% SalesLoft, 35% Salesforce, 15% Slack, 10% Gmail.”

Two interesting perspectives for sure.

SLACK / Vancouver Office

Getting Even with MSFT

In thinking about the deal, it is important to see this as a move by Salesforce to compete even more aggressively with Microsoft. We should all remember that Salesforce CEO Marc Benioff lost out to Microsoft in its bid for LinkedIn four years ago (coincidently at around the same sales price $27 billion).

Teams, Microsoft’s workplace messaging platform, has been gaining market share for some time now because Teams is “free” as it is embedded inside many version of Office365. This Medium article offers an interesting analysis of the competing platforms.

Source: The Verge

Mutual Opportunities

The marrying of Salesforce and Slack offers considerable opportunity for the companies. As we have seen Slack first hand, it is a bit like a social network platform, whereby its adoption and use accelerates by the number of users on the platform. Though it originated with internal engineering teams, the situations where we’ve observed Slack the most is with sales teams. And in these cases, like the ones we noted above, Slack can either be a fantastic productivity tool and a considerable time sink.

In either case, Slack is like other digital engagement “drugs” where if you can achieve habitual usage, it becomes a must-have tool. But as we heard from sales executives today, Slack is a component of an overall sales enablement and engagement platform. We think the place where Slack could be beneficial to Salesforce is building tight integrations between Slack and the breadth of Salesforce automation components.

From the perspective of Slack’s sales users, one useful integration would be a tool tagging internal sales conversations to customer records. This would enable more insight and analysis by those linking an internal conversation on Slack with a prospect record in Salesforce.

Path to an Open Network?

We would guess many of Localogy’s constituents are both Salesforce and Slack users. And they will likely applaud this deal. We’d also expect for some of Salesforces’ largest accounts that use Teams today would be prime targets for moving their messaging communication platform to Slack. In those cases, the estimated $6 per month would probably get bundled into the Salesforce pricing.

We imagine there is considerable brainstorming taking place inside virtual meeting rooms at Slack and Salesforce around the customer possibilities with a united company. Our gut is that there is a pathway for Slack to move beyond the walled garden of internal functional teams into a broader, more open network. With messaging continuing to gain share in terms of how companies and customers communicate, building customer connected messaging networks would be really, really interesting.

While these whiteboard sessions almost always define the upside of these transactions, there is no shortage of cautionary takes among failed big tech deals. Think AOL – TimeWarner, AT&T – Dish Network, Fox – MySpace, Intuit – DemandForce. In our view, Salesforce and Slack must share some common cultural characteristics for this deal to deliver full value to shareholders.

What Happens Next?

What other deals could this deal trigger? Could we see Microsoft go after Hubspot? That feels like a real possibility. Does Zoom buy Twitter? Or vice versa? Scale is so incredibly important that we should expect a very active merger and acquisition period in the near term. Companies will use equity capital to buy technology and market share that would otherwise take years to garner.

Some of this jockeying will come down to reading the antitrust tea leaves. How will the new administration address the antitrust issues that people like Scott Galloway rightfully rant about? Time will tell. In the meantime, this deal has the makings of a very successful move by Salesforce.

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