Reports indicating Salesforce’s interest in acquiring Slack, the widely-used workplace communication platform, caused a significant increase in the smaller company’s stock value today.

Currently, Slack’s shares have risen by nearly 25%, as reported by Yahoo Finance. As of this writing, Slack is trading at $36.95 per share, resulting in a company valuation of approximately $20.8 billion. This former unicorn company has seen its share price fluctuate between a low of $15.10 and a high of $40.07 within the past year.

Conversely, Salesforce’s stock is experiencing a decline following the news, dropping around 3.5% as of the time of writing. Investors in the San Francisco-based software-as-a-service (SaaS) leader may have expressed reservations about the potential merger, or potentially concerns regarding the acquisition cost required to integrate the 2019 initial public offering (IPO) into their portfolio.

The rationale behind Salesforce, a dominant software company specializing in customer relationship management (CRM) and aiming to expand its platform capabilities, wanting to purchase Slack isn’t immediately obvious, although several potential advantages exist. These include opportunities for cross-promotion of each company’s products to their respective customer bases, potentially stimulating growth for both organizations. For instance, Slack enjoys substantial market share among rapidly expanding startups, while Salesforce’s solutions are prevalent within numerous large corporations.

TechCrunch contacted Salesforce, Slack, and Slack’s Chief Executive Officer for a statement regarding the potential deal. This article will be updated as more information becomes available.

Salesforce previously acquired Quip for $750 million in 2016, providing some document sharing and collaboration capabilities. However, Salesforce Chatter has been the company’s primary social tool. Acquiring Slack would establish a strong presence for the CRM giant in the enterprise chat space and likely create significant synergy between customers and tools.

Slack has consistently offered more than just a basic chat application. It allows businesses to integrate workflows, which would complement Salesforce’s product suite encompassing sales, service, marketing, and other areas. This would enable companies to operate seamlessly both within and outside the Salesforce environment, creating streamlined and connected workflows. While this is possible currently, a combination of the two companies would undoubtedly result in much tighter integrations.

Furthermore, Holger Mueller, an analyst at Constellation Research, suggests that this acquisition would provide Salesforce with a recurring revenue stream, a key objective for sustaining their growth. “Slack could be a valuable addition to strengthen its platform, but more importantly, it would increase the usage and ‘stickiness’ of Salesforce products—as collaboration is crucial not only for CRM but also for the vendor’s expanding work.com platform,” Mueller stated. He also noted that it would present an opportunity to compete with Microsoft, a former partner.

Slack has faced increasing competition from Microsoft in recent quarters, as the Redmond-based software company has heavily invested in its competing Teams service. Teams challenges Slack’s chat functionality and Zoom’s video conferencing features and has experienced substantial customer growth recently.

Securing a corporate parentage within a larger technology company could safeguard Slack from being overshadowed by Microsoft’s extensive enterprise software sales. Salesforce, occasionally an ally of Microsoft, would likely benefit from adding the faster-growing Slack to its expanding software revenue.

The central consideration at this point revolves around the acquisition price. Slack’s investors will likely seek a substantial premium over the pre-report share price, which now appears somewhat outdated.