Salesforce.com Inc. today announced that it has entered a definitive agreement to acquire Slack Technologies Inc. in a deal valued at $27.7 billion.

Slack shareholders will receive $27.79 per share and 0.0776 shares of Salesforce common stock. The deal is a premium over the company’s market capitalization, which sat at $25 billion as of the close trading Monday.

The acquisition, first reported Nov. 25, is the largest software deal since International Business Machines Corp. agreed to acquire Red Hat Inc. for $34 billion in October 2018.

“This is a match made in heaven,” Marc Benioff, chief executive officer of Salesforce, said in a statement. “Together, Salesforce and Slack will shape the future of enterprise software and transform the way everyone works in the all-digital, work-from-anywhere world. I’m thrilled to welcome Slack to the Salesforce Ohana once the transaction closes.”

Salesforce Ohana is a support system inside of Salesforce which nurtures employees, customers, partners and developers, Ohana a Hawaiian word that represents the idea that families are bound together and responsible for one another.

The combined companies are said to provide a “single source of truth for their business and a unified platform for connecting employees, customers and partners with each other and the apps they use every day, all within their existing workflows,” Benioff added.

Post-acquisition, Slack will become an operating unit of Salesforce and will continue to be led by its CEO Steward Butterfield. Slack will be integrated into the Salesforce Cloud but will also continue to operate on a standalone basis as well. Salesforce said that with its support, Slack will be able to expand its presence in the enterprise, not just among Salesforce customers but for any company undergoing a digital transformation.

The deal comes in a year that has been dominated by the COVID-19 pandemic and a seismic shift to online work from lockdowns and travel restrictions. Companies providing online meeting and collaboration tools have surged in popularity, with video conferencing provider Zoom Video Communications Inc. leading the pack.

Slack, along with Microsoft Corp.’s Teams have been battling each other for user numbers in the space for years with both seeing surging demand during the pandemic be it with Teams coming out ahead. Slack, under the ownership of Salesforce will be much better placed in terms of exposure and resources to battle Microsoft Teams once again for market supremacy.

The rivalry between the two has not always been friendly. Slack filed an antitrust complaint in the European Union in July alleging that Microsoft was illegally boosting Teams, saying that the inclusion of Teams in Office 365 was illegal and anticompetitive.

Dustin Grosse, chief marketing and strategy officer at workflow automation company Nintex UK Ltd., told SiliconANGLE that it’s a bold move.

“Slack extends Salesforce capabilities beyond their leading customer relationship management platform into modern collaboration capabilities that will appeal to sellers, marketers, developers and other departments across many organizations,” Grosse said. “Remote working has become increasingly important due to COVID-19 this year and additional real-time communications solutions choices will accelerate how organizations collaborate to solve customer challenges.”

He added that it will be interesting to see how key Salesforce competitors such as Microsoft, Oracle Corp. and SAP SE respond to this acquisition. “I suspect that low-code digital process automation solutions to drive stronger interoperation between key systems of records like CRM, ERP, HRM, and unified collaboration platforms – like Slack and Teams – will be the next focus area to further improve work by eliminating paper and siloed data systems to streamline and digitally transform how work gets done,” he said.

Salesforce also delivered its third-quarter earnings report, beating analyst estimates but noting slower growth.

For the quarter ended Oct. 31, Salesforce reported revenue of $5.42 billion,  up 20% year-over-year with earnings per share of $1.15. Analysts had been predicting $5.25 billion and 75 cents per share, respectively.

Where the release disappointed was in guidance. Salesforce predicting revenue of $5.665 billion to $5.675 billion and earnings of 73 to 74 cents per share. Analysts had been predicting slightly lower revenue of $5.52 billion and higher earnings of 86 cents per share.

Slack also delivered its earnings Monday, topping estimates. The company reported revenue of $234.5 million, up 39% year-over-year, with earnings per share of a penny. Analysts had been predicting revenue of $223.5 million and a loss of five cents per share.

With both the earnings reports and the acquisition dropping at the same time, it’s difficult to ascertain which investors focused on more, but Salesforce shares fell nearly 5% in after-hours trading. Slack shares dropped slightly on the news, down less than a point.

The acquisition is expected to close in the second quarter of 2021.

Photo: Slack