Zoom to buy Five9 for $14.7bn in expansion push

Company's stock grew nearly five-fold during 2020 and has risen another 7.3% this year, pushing its market value past $100bn

FILE - In this April 18, 2019, file photo shows a sign for Zoom Video Communications ahead Nasdaq IPO in New York. Zoom's stock touched $110 during trading Monday, Feb. 24, 2020, a level it's reached just once since its shares began trading last spring. The company has said it's seeing more business for people wanting to meet online. (AP Photo/Mark Lennihan, File)

Video conferencing app Zoom Video Communications agreed to purchase cloud call centre software provider Five9 for $14.7 billion as part of its strategy to adapt to the post-pandemic world.

The agreement, which marks Nasdaq-listed company’s largest-ever acquisition, will help businesses engage with their customers in a “more meaningful and efficient way” and “build the customer engagement platform of the future”, the entities said in a joint statement.

Quote
The addition of Five9 is a natural fit that will deliver even more happiness and value to our customers
Eric Yuan, founder and chief executive of Zoom

“We are thrilled to join forces with the Five9 team … we are continuously looking for ways to enhance our platform ... the addition of Five9 is a natural fit that will deliver even more happiness and value to our customers,” Zoom founder and chief executive Eric Yuan said.

“Enterprises communicate with their customers primarily through the contact centre and we believe this acquisition creates a leading customer engagement platform that will help redefine how companies of all sizes connect with their customers,” added Mr Yuan.

Zoom’s stock has gained more than 34 per cent over the past 12 months and closed at $361.9 a share on Friday. The company's stock grew nearly five-fold last year and has soared another 7.3 per cent this year, pushing its market value past $100bn.

As per the agreement, which is expected to close in the first half of next year, Five9's shareholders will receive 0.5533 shares of Zoom for every Five9 share. Based on the closing price of Zoom's stock on Friday, each share of Five9 is valued at $200.28, implying a transaction value of almost $14.7bn.

The deal is approved by the boards of directors of Zoom and Five9 but it is subject to approval by Five9 stockholders and is pending regulatory clearance. Goldman Sachs is acting as a financial adviser to Zoom while Qatalyst Partners is advising Five9.

Businesses spend significant resources annually on their contact centres, but still struggle to deliver a seamless experience for their customers, Rowan Trollope, chief executive of Five9, said.

“Joining forces with Zoom will provide Five9’s business customers access to best-of-breed solutions, particularly Zoom phone, that will enable them to realise more value and deliver real results for their business.”

“Zoom’s broad communication portfolio ... will truly enable customers to engage via their preferred channel of choice,” Mr Trollope said.

California-based Five9, which provides a suite of applications that allows management and optimisation of customer interactions across various channels, registered rapid growth last year as companies adopted hybrid work models and started interacting with their customers remotely. Its revenue soared nearly 33 per cent annually to $435 million last year.

Zoom’s net profit during the February-April period surged more than 741 per cent, compared with a year ago, as companies increasingly adopted hybrid work models and demand for video conferencing increased.

Net profit to shareholders surged to $227m, from $27m in the same period a year ago, the company said in a regulatory filing.

The Five9 acquisition is the fourth deal by Zoom since the start of the Covid-19 pandemic, according to Bloomberg.

In June, it joined forces with German start-up Karlsruhe Information Technology Solutions-kites, a translation software maker. It was also part of an alliance that purchased a minority stake in a software firm Assembled in March and acquired Keybase Financial Group, a secure messaging and file-sharing service, last year.

Zoom’s operating cash flow was $533.3m for the first quarter, nearly 274.3m more than the same period last year. Total cash and marketable securities stood at $4.7bn on April 30.

Industry experts have said Zoom's sizeable cash reserves will help it acquire new start-ups in the coming months.

Updated: July 19th 2021, 2:16 PM
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