Written by Norman Isaac Mwambazi

Financial analyst says Salesforce acquisition of Slack could trigger M&A wave

On Wednesday, November 25, 2020, the Wall Street Journal reported that Slack Technologies Inc., the American international software company founded …

On Wednesday, November 25, 2020, the Wall Street Journal reported that Slack Technologies Inc., the American international software company founded in 2009 had held discussions with Salesforce.com, Inc., an American cloud-based software company for acquisition.

This news led to a spike in Slack’s shares by 27.6% in midday trading on Wednesday as investors bet on the expectation of the deal to make the software company to be valued higher than its current market capitalisation of $17 billion.

However, Salesforce, the company intending to acquire Slack had its stock plummet by 3.2% after Wall Street Journal’s report. The company’s stock had risen 1.1% before the report on Wednesday.

After the release of the report with news of the acquisition, Dan Ives, the Managing Director and Equities Analyst at financial services firm Wedbush Securities, said that this acquisition presents a major challenge to tech giant Microsoft.

Wedbush explained that the acquisition could trigger an upsurge in mergers and acquisitions (M&A) of software companies as companies that offer Customer Relationship Management (CRM) software and services try to keep their edge over the other.

“This deal would be a major shot across the bow at Microsoft with the company’s Teams offering a direct messaging competitor against Slack that has been a clear hurdle to growth and now would be a two-horse race between Microsoft and Salesforce,” Ives said in a note.

It is worth noting that Microsoft’s Dynamics 365 CRM service is a direct competitor to Salesforce, whose products include but not limited to Commerce Cloud, Sales Cloud, App Cloud, Data Cloud (including Jigsaw), Marketing Cloud, Service Cloud, Analytics Cloud, Internet of Things (IoT), and Community Cloud (including Chatter), with over 100,000 customers.

Ives believes that due to Salesforce’s acquisition of Slack, there could be a wave of software company acquisitions across the tech industry that would move from Microsoft and spread to other tech giants like Google as companies fight to be the king of the cloud. Ives said that this could happen as soon as the next three to six months.

Currently, Salesforce’s market capitalisation is $225.34 billion but it is expected to rise as soon as the acquisition is finalised.