Salesforce: Good at selling, better at buying

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Few weeks ago, Salesforce announced that it's acquiring Slack for $27.7B. Is Slack a good acquisition?

As mentioned in previous articles, on paper Slack is exactly the kind of company that might have "done a Zoom" in 2020 as remote work and biz communication tools exploded in usage and popularity. Thanks to competition from Microsoft that didn't quite happen, leaving its share price roughly where it was at the start of the year... until Salesforce swooped in with an offer for the whole thing.

It's true that Salesforce pays its bills by helping its customers sell and manage client relationships, but its own corporate strategy has been a lot more focused on buying. The Slack deal is Salesforce's biggest yet, and it comes just 16 months since Salesforce splashed $15.7B on buying Tableau — the analytics and data visualization software.

A lot of acquisitions end up being poor deals for the acquiring company. Too much ego, too much "empire-building" on the behalf of management or simply paying too much for the target company means that a lot of deals are often regretted 2, 3 or 4 years down the line. In fact with this acquisition, Salesforce’s CEO, Marc Benioff, has become tech’s top dealmaker, seizing the crown from his former boss Larry Ellison. So, did Salesforce overpay? Wall Street thinks so. In the days following the announcement, Salesforce stock took a beating and it fell.
 
Maybe $27B and change is too much to pay for Slack, a company that only does ~$230m of revenue per quarter. But, if any tech company has proven it knows how to buy and integrate big deals — it's Salesforce. While Salesforce is great at selling, it's for sure better at buying and integrating companies. Tableau is the latest testament to its success. With the acquisition, Slack will finally have an opportunity to strike back to Microsoft. 

Hey Google, if you want to compete with Microsoft in the Enterprise space, go acquire Salesforce.

Disclaimer: This post is merely my own assessment and is not an investment recommendation. For professional advice, seek input from a licensed investment advisor.







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