Zoom Video Communications, whose online conferencing services took off during the covid-19 pandemic, agreed to acquire Five9 Inc. for $14.7 billion, using its surging stock to expand into an adjacent market that could bolster revenue as lockdowns end.
The value of the all-stock offer is $200.18 a share based on the closing price for Zoom's common stock Friday, compared with Five9's $177.60 price on Friday, the companies said a statement Sunday. The target firm will become an operating unit of Zoom after the deal, which is subject to shareholder approval and is expected to close in the first half of 2022.
Zoom has been looking for ways to keep growing as workers begin to return to the office and students go back to school, and the deal for Five9 will help it expand offerings to its more lucrative business and enterprise clients. Five9, based in San Ramon, Calif., makes cloud-based software that uses artificial intelligence to help companies answer questions from customers and interact with them regardless of language, location or device.
The traditional call center, where a customer service representative responded by phone, has shifted to the internet and is now often powered or augmented by chat bots. The market for these cloud-based customer call centers is estimated at $24 billion, according to the companies. Together, Zoom and Five9 aim to better compete with the likes of Cisco Systems Inc., RingCentral Inc. and Amazon.com Inc..
Zoom Chief Executive Officer Eric Yuan called Five9 a "natural fit," and said Five9 is complementary to Zoom Phone, the company's business that replaces traditional company telephone services with modern, cloud-based offerings. But some analysts thought it was an expensive attempt to grab growth that Zoom couldn't achieve on its own. Zoom shares fell 2% in New York trading Monday, along with a broader market sell-off.
"This is a high-priced deal which appears to attempt to build out the Zoom Phone offering," said Neil Campling, an analyst at Mirabaud Securities. "Paying such a high price for a non-differentiated offering smacks of attempts to move into adjacent markets as Zoom fatigue sets in."
Five9's customers include big names like Under Armour, Citrix, Athena Health and Lululemon, according to its website. Rowan Trollope, CEO of Five9, will become a president at Zoom while continuing to run Five9 as an operating unit. Goldman Sachs advised Zoom and Qatalyst Partners advised Five9.
Joining forces builds on Zoom and Five9's existing co-selling relationship, and the decision was driven by "tremendous" customer interest to have one integrated solution, Trollope said on a call with analysts on Monday. "This is not an exit, this is just the beginning. We can absolutely come together to revolutionize this space."