'My eyes lit up' - Salesforce CEO on the moment Slack acquisition was suggested

Marc Benioff reveals that Salesforce COO and Slack founder orchestrated the merger

Salesforce is set to acquire Slack in one of the biggest software mergers ever.

The deal, which has been approved by the boards of both companies but is subject to approval from Slack shareholders, is valued at $27.7bn.

Salesforce CEO Marc Benioff revealed that the acquisition has been masterminded by COO Bret Taylor and Slack boss Stewart Butterfield.

"I couldn't be more excited about what Bret and Stuart have put together," he said on a call with investors, transcribed by Seeking Alpha.

"When they came to me and brought me this idea that Salesforce and Slack to come together, my eyes lit up.

"We see in Slack a once-in-a-generation company and platform, it's the central nervous system of so many companies on this call and our company and so many of our great customers connecting everyone and everything.

"Now we could go even bigger, better, more exciting and it brings all the companies, people, the data and the tools together."

Salesforce said that Slack will become the new interface for its Customer 360 and will be "deeply integrated into every Salesforce cloud".

It referred to the combination of the pair as creating "the operating system for the new way of work".

News of the acquisition first leaked last week, sending Slack's share price rocketing.

Its valuation has risen by over 80 per cent since the middle of last month, taking it to its highest point ever.

Salesforce said that around 90 per cent of Slack enterprise customers also use Salesforce's software.

Slack cancelled its scheduled call with investors in light of the acquisition news, but in a statement CEO Butterfield said: "As software plays a more and more critical role in the performance of every organization, we share a vision of reduced complexity, increased power and flexibility, and ultimately a greater degree of alignment and organizational agility.

"Personally, I believe this is the most strategic combination in the history of software, and I can't wait to get going."

The acquisition also takes Salesforce's fight against Microsoft into a new arena.

The pair have been locked in battle in the CRM space for years, with the introduction of Dynamics 365 in 2016 intensifying the fight.

But Salesforce has now made itself part of the head-to-head scrap between Slack and Microsoft Teams.

Slack had been considered the undisputable leader in the workplace collaboration space, but the Microsoft Teams has seen rapid growth since its launch in 2017 - growth which Slack claims is illegal.

Forrestor analyst Kate Leggett said the move is a "stellar exit strategy for Slack", in its fight against Microsoft, adding: "Microsoft Teams is eating Slack's lunch."

Slack will operate as a business unit of Salesforce and will continue to be led by founder Butterfield.

Salesforce expects the acquisition to close in the second quarter of its 2022 fiscal year. Salesforce's financial years start on 1 February.

The CRM giant also revealed earnings for Q3, with sales rising 20 per cent year on year to $5.42bn.

The firm beat analyst in the quarter, but guidance for Q4 was below Wall Street expectations, sending its share price down five per cent in after-hours trading.

Salesforce also revealed plans to sublease a number of its premises in light of the pandemic's impact on working culture.

Slack meanwhile saw revenue climb 39 per cent year on year to $234.5m.

The number of net-new paying customers rose by 140 per cent.