Talk about a roller coaster ride.
Zoom, the video conferencing company that became everyone’s main communication medium at work during the pandemic, will no longer acquire Five9, a cloud-based customer service software maker. Although the all-share deal, announced in July, was expected to allow Zoom to take advantage of the lucrative contact center market, some major setbacks along the way apparently led to today’s decision.
First, Zoom shares, which moved almost straight into the sky over the past two years, have been under pressure more recently, so the Five9 deal, which was valued at $ 14.7 billion in July, would have been considerably less today. . (On the day the deal was announced, Zoom’s stock was trading at around $ 360 apiece; now they’re trading at closer to $ 260 a share.)
It certainly didn’t help matters when Zoom revealed last week that a panel led by the US Department of Justice has been investigating the link out of concerns that it could create national security risks given Zoom’s ties to China.
Founder Eric Yuan is a naturalized US citizen who was born in China and moved to the US at age 27 in 1997. (Several years ago, I spoke with Yuan about overcoming numerous obstacles to do this).
Zoom also said last year that it had mistakenly routed some meetings through servers in China and that it closed the account of an activist who was using the platform to commemorate China’s Tiananmen Square crackdown. Subsequently, the company, which had previously said that a considerable part of its development team is located in China (as is the case with many multinational companies), announced that it would not allow requests from the Chinese government to impact anyone outside of mainland China. .
Still, the figurative nail in the coffin could have been a recommendation two weeks ago from power advisory firm Institutional Shareholder Service that Five9 shareholders vote against the acquisition out of concerns about Zoom’s slowing growth.
That advice appears to have been heeded, and Five9 issued a press release today that the merger plan had been “rescinded by mutual agreement” between the two companies. Zoom separately released an ad of its own, downplaying the importance of the broken deal.
Titled “Whats NextYuan writes about Five9 that “it presented an attractive medium to bring an integrated contact center offering to our customers. That said, ”he adds,“ it was in no way critical to the success of our platform, nor was it the only way to offer our customers a compelling contact center solution. ”
Either way, development was obviously expected. When news emerged that the acquisition was canceled, Zoom and Five9 stock prices barely moved.