The deal is likely to be valued at around $17 billion as Salesforce expects to add the slack app to its office product portfolio. Slack stock has been rallying on the news while Salesforce shares are under pressure amid investor’s concerns over higher acquisition price. This would be the largest ever acquisition for Salesforce. Last year, the software developer has bought Tableau Software for $15.7 billion.  

Expansion strategies could negatively impact margins

Salesforce has aggressively been looking to expand its product portfolio and market share through acquisitions and investments in organic growth opportunities. Morgan Stanley has recently dropped Salesforce stock from Overweight to Equal-Weight amid concerns over margins. Analyst Keith Weiss said, “Significant margin expansion” is unlikely due to Salesforce’s subscription model and M&A focus.

The company recently announced a plan of adding 4,000 jobs in the next six months and 12000 in the next year, thanks to strong demand trends and growth plans. It has also raised a full-year revenue outlook to $20.8 billion from the earlier forecast of $20 billion. The potential slack acquisition would significantly boost its revenue in the years ahead. Meanwhile, BMO analyst Keith Bachman expects 17% year over year growth in fiscal 2020 from its services cloud business.