Zoom and Five9 abandon $ 14.7 billion acquisition


Eric Yuan, Founder and CEO of Zoom Video Communications Inc., speaks during the BoxWorks 2019 Conference at Moscone Center in San Francisco, California, United States, Thursday, October 3, 2019.

Michael Court | Bloomberg | Getty Images

Zoom’s deal to buy cloud-based contact center software company Five9 was scuttled on Thursday, after Five9 shareholders rejected the deal.

Zoom said in July it was acquiring Five9 in a $ 14.7 billion stock purchase, its first $ 1 billion plus purchase and, at the time, the second largest deal. technology of the year. The company has now lost an opportunity to rapidly expand its capabilities after its shares recovered during the coronavirus pandemic.

Five9 shares fell 2% in extended trading following the declaration enterprises.

The purchase of Five9 “presented an attractive way to bring our customers an integrated contact center offering,” wrote Eric Yuan, founder and CEO of Zoom, in a. blog post. “That said, this was by no means essential to the success of our platform, nor was it the only way we could offer our customers a compelling contact center solution.”

A branch of the US Department of Justice was reviewing the deal for fear of potential foreign participation, according to a letter dated Aug. 27 to the Federal Communications Commission. But Zoom said last week, when news of the review broke, that he still expected the deal to be done in the first half of 2022.

While some important technology acquisitions, especially in the semiconductor industry, have recently been turned down by regulators, it is highly unusual for companies to voluntarily terminate their own deal.

Proxy advisory firm Institutional Shareholder Services had recommended that shareholders vote against the proposal, CNBC reported on September 17.

Zoom went public just two years ago, and the pandemic has been a major boon to its business, as customers rushed to sign up for its video chat software. The company had $ 1.9 billion in cash and cash equivalents on its balance sheet at the end of July.

Five9 also selected customers who needed to set up remote and distributed call centers.

The shareholders of Five9 were ultimately not satisfied with the small premium that Zoom had to pay. At the agreed price, they were only going to receive a 13% increase in the value of their shares from where they were trading before the deal. Considering the momentum of cloud software and all the money investors put into Five9’s peers, a significantly higher premium was likely expected.

Additionally, Zoom shares have fallen 28% since the deal was announced, while Five9 shares have fallen only 11%. Because this is a market swamp, it means Five9 shareholders would have received an even lower premium than the agreed price.

Zoom and Five9 since the agreement

CNBC

Microsoft’s $ 19.7 billion purchase of Nuance Communications, including debt, represents a 23% premium over Nuance’s previous close. In what later became the biggest tech deal of the year, Square agreed to buy Afterpay in Australia for $ 29 billion, a 30% premium.

Zoom turned to Five9 to reduce its reliance on video and audio meetings that have become so popular with businesses and other organizations. Taking into account the impact he expected from Five9, the leaders of Zoom told analysts earlier this month, they envisioned a total addressable market of $ 91 billion in 2025, up from $ 34 billion in 2019.

Zoom and Five9, which had a product partnership prior to the acquisition agreement, said they would maintain support for integrations.

– CNBC’s Ari Levy contributed to this report.

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Margie D. Carlisle