Why the Slack share price has surged 46% in just 5 sessions

Slack surges on acquisition news, Salesforce dips

On Tuesday, November 1, software heavyweight Salesforce (CRM) revealed it had signed a definitive agreement to acquire business communications company Slack (WORK).

‘Salesforce started the cloud revolution, and two decades later, we are still tapping into all the possibilities it offers to transform the way we work. The opportunity we see together is massive,’ Slack’s CEO, Stewart Butterfield, said of the acquisition.

This comes just a week after the Wall Street Journal reported that Salesforce had been in talks to acquire the business communications company. For Slack investors, this was framed as a decisive win: Investors bid the stock 37% higher one the day that news broke and the share prices have continued to trend higher since, now up 46% in the last five sessions.

Slack last traded at $43.84 per share, giving it an implied market capitalisation of around $25 billion.

Salesforce investors have responded less optimistically to news of the Slack acquisition, with the stock down 7% in the last five sessions. The stock continued to fall after-hours on Tuesday, off the back of Salesforce confirming the takeover as well as releasing its Q3 results to the market.

The deal at a glance

Under the definitive agreement, Salesforce is set to acquire Slack in a cash plus shares deal: For every Slack share held, Slack investors will receive $26.79 in cash and 0.0776 Salesforce shares – valuing Slack at close to $28 billion.

Prior to the Wall Street Journal’s report last week, the company had an enterprise value of around $17 billion, according to MarketWatch.

Salesforce said it would use a combination of existing cash reserves and new debt funding to facilitate the acquisition.

Looking at the practical implications and synergies of the acquisition, Salesforce said that:

‘Slack will be deeply integrated into every Salesforce Cloud. As the new interface for Salesforce Customer 360, Slack will transform how people communicate, collaborate and take action on customer information across Salesforce.’

In addition to that, a greater strategic focus looks to be placed on enterprise customers, with it being noted Slack will be well positioned to expand its customer-base not only among Salesforce customers, but also ‘any company undergoing digital transformation.’

‘This is a match made in heaven. 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,’ Salesforce CEO, Marc Benioff said.

The acquisition still requires approval from Slack’s shareholders.

Barring that or any other regulatory issues, the deal is expected to be finalised in Q2 of Salesforce’s fiscal 2022.

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