Markets: Zoom Walks Back On $15B Five9 Deal

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Zoom, the video-conferencing software giant, has walked back on what could have been its biggest acquisition to date. It’s terminated its plan to buy Five9, a cloud-based call center software provider, for $14.7bn, all with Zoom shares.

  • Zoom announced that it terminated the acquisition because it didn’t obtain enough support from Five9 shareholders to proceed. It’s not surprising because Zoom’s stock has dropped 26% from the day it agreed to buy Five9 till now, and given the deal was all with shares, the implied $14.7bn price tag also dropped by 26% to about $11bn, making shareholders reject it.
  • Typically, Zoom could have bumped up the offer either with shares or a cash component if it was keen on buying Five9, but it didn’t do so for unclear reasons. It could be because the acquisition wasn’t just facing shareholder scrutiny but also scrutiny from a US government committee on national security concerns.
  • The national security concern stemmed from Zoom’s ties to China, where the company operates a significant research & development hub. Zoom’s founder, Eric Yuan, is a native of China, but he’s a naturalized US citizen whose company is also registered in the US.
With Five9, Zoom planned to gain a foothold in the market for cloud-based call center software to diversify its business rather than start from scratch there. But with the deal called off, it appears the company now has to build from the ground up with the launch of its own call center software business that’s scheduled for 2022.
  • Zoom and Five9 had a product partnership before the planned acquisition. Both companies said the partnership will stay in place despite the terminated deal.
  • Zoom’s stock was up 1.6% after the termination was announced, so it appears its shareholders didn’t react negatively to the news, maybe because they expected it.

                                        

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