- Salesforce has held talks to buy Slack, according to a Wall Street Journal report earlier this week, and if a deal goes through, it would be Salesforce's largest acquisition ever.
- Analysts and experts predict more consolidation and M&A to come in the cloud space, particularly in collaboration software.
- As companies continue to move to the cloud, it will spur an "influx of spending (as well as M&A)" over the next few years, Wedbush analyst Dan Ives wrote in a note to clients.
- As remote work remains the norm for the foreseeable future, collaboration tools are becoming essential to how companies get work done so cloud giants like Salesforce may look to acquire those capabilities, said D.A. Davidson analyst Rishi Jaluria.
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Salesforce has held talks to buy Slack, according to a Wall Street Journal report earlier this week, and if a deal goes through, it would be Salesforce's largest acquisition ever, given Slack's $17 billion market cap.
The potential for a purchase of that size has industry watchers thinking about what could come next and analysts and experts expect more M&A in the cloud software space in the coming year.
Right now only 35% of company workloads are run on the cloud, but that number is expected to grow to 55% by 2022, spurred in part by accelerated digital transformation due to remote work and the pandemic, Wedbush analyst Dan Ives wrote in a note to clients earlier this week. That means the "the overall cloud ecosystem is poised to see an influx of spending (as well as M&A) over the next few years," Ives wrote.
Baird analysts agree, writing in a note to clients earlier this week that "with digital transformation in full swing, we wouldn't be surprised by additional strategic M&A."
The report about Salesforce's interest in Slack comes shortly after Adobe acquired work management tool for marketers, Workfront,for $1.5 billion, a deal that DA Davidson analyst Rishi Jaluria described at the time as a sign that companies were looking to add collaboration tools to their product stack.
"We would expect larger enterprise players like Microsoft, Salesforce, ServiceNow, and Workday to make further acquisitions of collaboration software," he wrote at the time, adding that the collaboration space is "crowded" with a number of smaller companies.
Following up on that prediction, Jaluria told Business Insider earlier this week that in addition to Slack, companies like Dropbox, PagerDuty, Asana, and Smartsheet could be acquisition targets for larger cloud companies which don't have those teamwork-oriented capabilities yet. As remote work remains the norm for the foreseeable future, collaboration tools are becoming essential to how companies get work done.
"Salesforce is obviously continuing to broaden into a bigger platform," Jaluria said. "They want to be not just in the sales and marketing department, but, they're increasingly going to be in collaboration, they're going to increasingly be in your back office areas and analytics."
It's easier for companies to succeed when they have suites of tools bundled together, said the chief evangelist of Indian software company Zoho, Raju Vegensa. Zoho offers a suite of tools ranging from customer relationship management to productivity.
"There is a consolidation going on with not a lot of room for individual companies with single products," Vegensa said. "Which means individual companies with single products will be acquired over time because we are headed toward suites."
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