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The deal marks Zoom’s first billion-dollar acquisition and comes as the company braces for a post-pandemic world with employees returning to the office. This is the second-biggest U.S. tech deal this year, behind Microsoft’s $ 16 billion purchase of Nuance Communications, according to FactSet.
“We are always looking for ways to improve our platform, and the addition of Five9 is a natural solution that will bring even more happiness and value to our customers,” Zoom CEO Eric Yuan said in A press release.
Five9 closed on Friday with a market cap of $ 11.9 billion, or $ 177.60 per share. Zoom has stated that shareholders of Five9 will receive 0.5533 shares of Zoom Video Communications for each share of Five9. That values Five9 at $ 200.28 per share, a 13% premium, and represents about 14% of Zoom’s market cap of nearly $ 107 billion.
Zoom has been one of the main growth stories in the 16 months since Covid-19 caused a sudden closure of offices around the world, forcing workers in finance, retail, technology and the right to communicate from remote locations.
After increasing its revenue by 326% in 2020, Zoom is facing a natural slowdown, especially as businesses reopen and face-to-face meetings resume. While the company has launched new products to accommodate upcoming changes in its business, it is now so large that organic growth alone is unlikely to satisfy Wall Street. It also needs new revenue streams as Microsoft ramps up video chat competition with Teams.
Zoom’s share price jumped nearly 400% last year, although it has fallen 36% since peaking in October.
Five9’s revenue soared 33% to $ 435 million last year. CEO Rowan Trollope told CNBC’s Jim Cramer in May that the company signed two of its biggest contracts in the last period, expecting them to generate more than a combined $ 20 million per year.
“We no longer have to convince customers that the cloud is an acceptable option,” he said. “They’re just diving. “
The agreement brings together two former Cisco executives. Yuan, who founded Zoom in 2011, previously helped create WebEx, which Cisco bought in 2007 for $ 3.2 billion. He stayed with Cisco until he left to launch Zoom.
Trollope will become president of Zoom and remain CEO of Five9, reporting to Yuan.
Trollope joined Cisco in 2012 after a 22 year career with Symantec. He eventually became senior vice president in charge of all Cisco collaboration products and was considered by some analysts to be CEO Chuck Robbins’ best lieutenant. He stepped down to take on the role of CEO of Five9 in 2018.
The transaction is expected to be finalized in the first half of 2022. Five9 shareholders have yet to approve the transaction, which requires regulatory approval. Goldman Sachs advised Zoom on the acquisition, and Frank Quattrone’s Qatalyst Partners advised Five9.
The two companies will host a Zoom call for investors on Monday at 8:30 a.m. New York time.
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