Recently, Salesforce reached a deal to acquire Slack for a price of $27.7 billion in what marks as its biggest acquisition ever and one of the biggest from the tech industry in recent years. The acquisition beats Salesforce’s previous record which was the $15.7 billion acquisition of Tableau Software that it closed just last year. 

Before Tableau, Salesforce’s biggest acquisition was its $6.5 billion purchase of MuleSoft in 2018. Notably, Salesforce has spent over $30 billion on seven big acquisitions since 2013, being ExactTarget ($2.5 billion in 2013) Demandware ($2.8 billion, 2016) Quip ($750 million, 2016), MuleSoft ($6.5 billion, 2018), ClickSoftware ($1.35 billion, 2019), Vlocity ($1.33 billion, 2019), and Tableau ($15.7 billion, 2019).

Salesforce’s host of splashy acquisitions in recent years has placed its CEO Marc Benioff as sort of the biggest dealmaker in the software industry, a title that interestingly was once held by the software company Oracle under its then CEO Larry Ellison, who Benioff worked closely with early on in his career.

Before starting Salesforce, Benioff worked at Oracle where he became the company’s then youngest-ever Vice President, spending 13 years in total at the company. At Oracle, he worked closely with its founder and CEO Larry Ellison and led Ellison to be an angel investor in Salesforce when Benioff launched the company. 

Larry Ellison. Photo credit: Oracle PR, licensed under CC BY 2.0

Early on, Benioff and Ellison, however, had a falling out and made Ellison end his involvement with Salesforce. The fallout reportedly spurred from Salesforce entering into direct competition with Oracle and angering Ellison as a result.

Despite the fallout, Benioff seems to have taken important deal-making lessons from Ellison, who in the 2000-2010(s) era was the top software dealmaker who oversaw many splashy and strategic acquisitions to expand his company. 

Under Ellison’s leadership, Oracle spent tens of billions of dollars on many acquisitions, including PeopleSoft which it paid $10.3 billion for in 2005, Siebel Systems for $5.9 billion in 2006, $3.3 billion on Hyperion in 2007, $8.5 billion on BEA Systems in 2008, $7.4 billion on Sun Microsystems in 2010, and $9.3 billion on NetSuite in 2016.

The aforementioned acquisitions were part of Ellison’s strategy to expand his company by gobbling up other services and apparently worked, with Oracle’s annual revenues rising from $11.8 billion in 2005 to $38.3 billion in 2014 which was the year Ellison stepped down from his role as CEO.

Now, it seems Benioff has taken the crown from Ellison, with Salesforce swallowing other companies to gain more business. It has also worked well for the company, with its revenues soaring from $3 billion in 2013 wherein it made its first billion-dollar acquisition to $13.3 billion last year.

Notably, Salesforce surpassed Oracle’s market value for the first time ever this year, making it seem like Benioff is winning even better than his old boss. Salesforce’s soaring market value in recent years has been driven by the stellar growth of its cloud business whereas Oracle got into the cloud business late and now lags much behind its two major competitors, Amazon Web Services and Microsoft. 

Photo credit: Salesforce

Ellison was notably a frequent basher of the cloud industry before changing his mind to embrace it. As of when he changed his mind, it was apparently late however, with the likes of Amazon and Microsoft having shot past Oracle in the sector. 

Now, Oracle makes do with just a 2% cloud market share, according to estimates from the Synergy Research Group, whereas Amazon commands with 33%, followed sequentially by Microsoft (18%), Google (9%), Alibaba (6%), IBM (5%), Salesforce (3%), and Tencent (2%) with Oracle.

Back to Salesforce, its $27.7 billion purchase price for Slack is about 32 times Slack’s projected revenue of $876 million for this year and about 24 times its projected revenue for next year. 

Benioff is apparently betting big on the business communications platform Slack being a product that’ll drive significant growth, with Slack’s CEO Stewart Butterfield in agreement and calling the acquisition an event “that we will remember a couple of decades from now” and comparing it to landmark computing events like the launch of Windows 95 in a statement at Salesforce’s annual Dreamforce event on Wednesday.

Anchor photo: Salesforce CEO Marc Benioff by TechCrunch is licensed under CC BY 2.0

Share this...

Facebook

Pinterest

Twitter

Linkedin

Whatsapp

Email

Print