(Bloomberg) — Zoom Video Communications Inc. has agreed to acquire Five9 Inc. for $14.7 billion in its largest-ever acquisition, targeting a call center provider to bolster its popular video conferencing app against increasing competition.
Zoom will use its rising stock to pay for the deal, giving Five9 investors 0.5533 shares of its Class A common stock under an agreement announced Sunday. The target company will become an operating unit of Zoom following the deal, which is subject to shareholder approval and is expected to close in the first half of 2022.
The acquisition could propel Zoom into a $24 billion contact center market, the company said, helping it compete better with companies like RingCentral Inc. that connect users around the world over the Internet. The deal is intended to help build Zoom Phone, a cloud-based calling service, the companies said in a statement. Five9’s clients include big names like Under Armour, Citrix, Athena Health and Lululemon, according to the website, and the transaction also aims to be a way for Zoom and Five9 to sell products to each other’s customers.
“We are continuously looking for ways to improve our platform, and the addition of Five9 is a natural fit,” Zoom Chief Executive Officer Eric Yuan said in a statement.
Zoom to Buy Five9 in All-Stock Deal at 13% Premium: M&A Snapshot
Zoom rose to prominence after the pandemic hit in early 2020 and became ubiquitous when people forced home by lockdowns used the service to connect remotely to work, school, friends and family. But investors this year have expressed concerns about whether that growth will continue as vaccinations ramp up and shutdowns end.
What Bloomberg Intelligence says
Unified communications and collaboration (UC&C) market share of total IT spend could remain stable at around 5% as businesses move to cloud-native platforms, and should remain so post-pandemic. That’s because organizations are rethinking their plans for digital technologies to include video, voice, and team collaboration tools as flexible or hybrid work models gain traction. UCaaS should continue to be a key growth engine for the $47 billion UC&C industry, with companies increasingly bundling video and collaboration solutions in the cloud to accommodate the secular shift in work culture.
– Amine Bensaid and Mandeep Singh, analysts
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With pandemic lockdowns easing, the future of remote working has become a pressing demand and Zoom’s competitors have launched hybrid work functions in a race to meet the needs of businesses. Microsoft Corp. last week unveiled design changes to its Teams platform to improve remote worker interactions during meetings. Google from Alphabet Inc. earlier this month unveiled updates to its Workspace productivity suite, including new tools for its Meet video conferencing system.
Goldman Sachs advised Zoom and Qatalyst Partners advised Five9. Rowan Trollope, CEO of Five9, becomes president of Zoom and continues to lead Five9 as an operating unit.
Zoom is taking advantage of a stunning stock rally to fund the Five9 acquisition. The stock has roughly quintupled in 2020 and is up another 7.3% in the year so far, pushing its market value above $100 billion.
The acquisition is the fourth deal by Zoom since the start of the pandemic, according to data collected by Bloomberg. In June, Zoom announced without disclosing the terms that it had signed a deal to acquire German startup Karlsruhe Information Technology Solutions-kites GmbH, a maker of translation software.
In March, Zoom was part of a group that acquired a minority stake in software company Assembled Inc., the data shows. And in May 2020, it bought Keybase Financial Group Inc., which makes a secure message and file sharing service, on undisclosed terms to bolster its encryption technology.
(Updates with details from the statement from the second paragraph)
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