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Dow: 0.29% | Nasdaq: 0.23% | S&P: 0.06%

Catch Up Quick

• FedEx ($FDX) agreed to buy Chicago-based shipping payment e-commerce network ShopRunner

• The November jobs report is out tomorrow at 8:30am ET, in which the economy is expected to have added ~500K jobs last month

• Delta warns of slowing bookings, higher cash burn as COVID cases rise

• USPS delays announcement on possible electric vehicle fleet deal

• IBM uncovers global email attack on COVID vaccine supply chain

• Uber is reportedly in advanced talks to sell its Uber Elevate unit

• Mitch McConnell says a stimulus compromise is within reach

• Digital health startup Everlywell has raised a $175M in a Series D

• Discovery launched its new streaming service called Discovery+

• Southwest warns 6,800 employees of potential furloughs

• Christmas Tree sales are up 29% so far in 2020

Thought of the Day

• In the largest software M&A deal since IBM's acquisition of Red Hat in late 2018, yesterday, Salesforce ($CRM) formalized its intent to purchase Slack ($WORK) for $27.7B in cash and stock

• Since, copious financiers and technologists have gone out of their way to use this as a "final straw" for record high technology valuations

• One venture capitalist who preferred to remain anonymous told Pitchbook "I give up...I could have made a solid case for Slack at one-third that amount... and I'm feeling the same about most of the venture deals I see getting done"

• However, the truth is, minority venture investors and industry critiques are typically not in the trenches with pre-announcement deal discussions

• Taking a step back, when executives of a Fortune 500 company contemplate growth, options to bolster the product suite always begin at the same starting point, bifurcated accordingly: 1) build in-house or 2) acquire

• For a vanguard software company, its industry environment is characterized by high scalability & demand and low entry barriers, which deem first mover advantages crucial to establishing a competitive advantage

• Because so, in this rapidly changing, relatively stochastic playing field, time to market lag associated with building new products and features in house can be devastating

• Thus, an explanation for the trend behind M&A deal flow in the technology sector arises

• Between its $15.3B acquisition of data visualization company Tableau in 2019 and its $6.5B deal with back-end software developer Mulesoft in 2018, Salesforce has a strong track record of successful inorganic growth

• Paying nearly $30B for a negative cash flow asset (Slack) certainly seems tough to justify upon initial glance

• However, in the software realm, it is often overlooked that profitability metrics are materially inferior to growth rates as drivers of valuations

The Bottom Lines

• Before the pandemic, a highly connected remote workforce was a luxury; now, for many companies, it is a necessity

• Given it's repeated intention to level the playing field with Microsoft and the fact that Slack fills a huge vacancy in the collaboration vertical of its existing product suite, this deal, as a long-term bet by Salesforce to capitalize on the lucrative trend of sustained work-from-wherever, deserves more consideration than purchase price

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