Business Combinations

12 Months Ended

Jan. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Fiscal Year 2023

Traction Sales and Marketing Inc.

In April 2022, the Company acquired all outstanding stock of Traction Sales and Marketing Inc. ("Traction on Demand”), a professional services firm that provides innovative and critical solutions to clients using the Company’s service offerings and other advanced cloud technologies. The acquisition date fair value of the consideration transferred for Traction on Demand was approximately $340 million, which consisted primarily of $302 million in cash. The Company recorded approximately $62 million for customer relationships with estimated useful lives of five years. The Company recorded approximately $293 million of goodwill which is primarily attributed to the assembled workforce. For the goodwill balance, there is some basis for foreign income tax purposes but no basis for U.S. income tax purposes. The fair values assigned to tangible assets acquired and liabilities assumed are based on management’s estimates and assumptions and may be subject to change as additional information is received and certain tax returns are finalized. The primary areas that remain preliminary relate to the fair values of intangible assets acquired, certain tangible assets and liabilities acquired, legal and other contingencies as of the acquisition date, income and non-income-based taxes and residual goodwill. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. The Company has included the financial results of Traction on Demand in its condensed consolidated financial statements from the date of acquisition, which were not material. The transaction costs associated with the acquisition were not material.

Fiscal Year 2022

Slack Technologies, Inc.

On July 21, 2021, the Company acquired all outstanding stock of Slack, a leading channel-based messaging platform. The transaction costs associated with the acquisition were approximately $54 million and were recorded in general and administrative expense during fiscal 2022. The acquisition date fair value of the consideration transferred for Slack was approximately $27.1 billion, which consisted of the following (in millions):


	Fair Value
Cash	$	15,799
Common stock issued	11,064
Fair value of stock options, restricted stock units and restricted stock awards assumed	205
Total	$	27,068

The fair value of the stock options assumed by the Company was determined using the Black-Scholes option pricing model. A share conversion ratio of 0.1885 and 0.1804 was applied to convert Slack's outstanding (i) stock options and restricted stock units and (ii) restricted stock awards, respectively, into equity awards for shares of the Company’s common stock.

The following table summarizes the fair values of assets acquired and liabilities assumed as of the date of acquisition (in millions):


	Fair Value
Cash and cash equivalents	$	1,508

Accounts receivable	98
Acquired customer contract asset	70
Operating lease right-of-use assets	200
Other assets	409

Goodwill	21,410
Intangible assets	6,350
Accounts payable, accrued expenses and other liabilities	(478)
Unearned revenue	(382)
Slack Convertible Notes (see Note 9)	(1,339)
Operating lease liabilities	(303)
Deferred tax liability	(475)
Net assets acquired	$	27,068

The excess of purchase consideration over the fair value of other assets acquired and liabilities assumed was recorded as goodwill. The resulting goodwill is primarily attributed to the assembled workforce and expanded market opportunities, including integrating the Slack product offering with existing Company service offerings in a digital-first, work anywhere world. The goodwill has no basis for U.S. income tax purposes.

The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (in millions):


	Fair Value		Useful Life
Developed technology	$	2,360	5 years
Customer relationships	3,690		8 years
Other purchased intangible assets	300		6 years
Total intangible assets subject to amortization	$	6,350

Developed technology represents the preliminary estimated fair value of Slack's data analysis technologies. Customer relationships represent the preliminary estimated fair values of the underlying relationships with Slack customers.

The Company assumed unvested stock options, restricted stock units and restricted stock awards with an estimated fair value of $1.7 billion. Of the total consideration, $205 million was allocated to the purchase consideration and $1.5 billion was allocated to future services and will be expensed over the remaining service periods on a straight-line basis.

Acumen Solutions, Inc.

In February 2021, the Company acquired all outstanding stock of Acumen Solutions, Inc. (“Acumen”), a professional services firm that provides innovative and critical solutions to clients using the Company’s service offerings and other advanced cloud technologies. The acquisition date fair value of the consideration transferred for Acumen was approximately $433 million, in cash. The Company recorded approximately $99 million for customer relationships with estimated useful lives of eight years. The Company recorded approximately $337 million of goodwill which is primarily attributed to the assembled workforce. For the goodwill balance there is no basis for U.S. income tax purposes.

Fiscal Year 2021

Vlocity

In June 2020, the Company acquired all outstanding stock of Vlocity, Inc. ("Vlocity"), a leading provider of industry-specific cloud and mobile software. The transaction costs associated with its acquisition were immaterial. The acquisition date fair value of the consideration transferred for Vlocity was approximately $1.4 billion, which primarily consisted of $1.2 billion of cash paid and $208 million of fair value related to the pre-existing relationship. The Company recorded $473 million of intangible assets related to customer relationships and developed technology with useful life of four to eight years. Developed technology represents the fair value of Vlocity’s industry-specific cloud and mobile software. Customer relationships represent the fair values of the underlying relationships with Vlocity customers. The Company recorded $1.0 billion of goodwill which is primarily attributed to the assembled workforce and expanded market opportunities, for which there is no basis for U.S. income tax purposes.

The Company assumed unvested options with a fair value of $139 million. Of the total consideration, $6 million was allocated to the purchase consideration and $133 million was allocated to future services and will be expensed over the remaining service periods on a straight-line basis.

The Company had a noncontrolling equity investment in Vlocity valued at $167 million prior to the acquisition. The Company recognized a gain of approximately $41 million as a result of remeasuring its prior equity interest in Vlocity held before the business combination. The gain is included in gains on strategic investments, net in the consolidated statements of operations.

Evergage

In February 2020, the Company acquired all outstanding stock of Evergage Inc. ("Evergage") a cloud-based real-time personalization and customer data platform. The acquisition date fair value of the consideration transferred for Evergage was approximately $100 million, which consisted of cash and the fair value of stock options and restricted stock awards assumed.