Zoom has announced a US$14.7 billion all-stock deal to acquire cloud-based call center operator Five9 Inc which will become the company’s largest-ever acquisition as competition intensifies in its core videoconferencing sector according to a new report from Reuters.
The video conferencing service provider became popular during the pandemic as millions flocked to it to communicate with their loved ones and stay connected with their businesses.
The company is now shifting its attention to its two-year-old cloud-calling product called Zoom Phone and a conference-hosting product called Zoom Rooms. Other tech companies such as Facebook and Google enhance their video conferencing solutions.
“The acquisition is expected to help enhance Zoom’s presence with enterprise customers and allow it to accelerate its long-term growth opportunity by adding the $24-billion contact center market,” Zoom said in a statement on Sunday.
The essence of the acquisition is to complement the Zoom Phone service which is going to become an alternative to legacy phone offerings by adding Five9’s business customers to its own system as well as combining its contact center software to optimize customer interactions across multiple channels.
Some important Five9’s customers include Under Armour, Lululemon Athletica, and Olympus Corp according to the service’s website. With that, Five9 will become an operating unit of Zoom while its CEO Rowan Trollope will become a president of the company while staying on as the chief of the unit after the completion of the deal which is expected to close in the first half of the year 2022.
Under the pact, approved by the boards of both companies, Five9 stockholders will receive 0.5533 shares of Class A common stock of Zoom for each share of Five9, it added.
Based on the July 16 closing share price of Zoom Class A common stock, this represents a price of $200.28 for each share of Five9 common stock, or nearly a 13% premium, and an implied deal value of about $14.7 billion.
Zoom’s share rose 1.4% to US$361.97 on Friday which brought the company’s valuation to bout US$106 billion. The company went public back in 2019 and has seen exponential growth in the past year with over 45% growth.
Other video conferencing platforms that have enjoyed public attention includes the Cisco WebEx and Microsoft Teams as more companies allow their employees to work remotely due to the adverse effects of the COVID-19 pandemic, these were tools the majority of the public used to communicate.
There was also a huge spike in the global spending on cloud-based conferencing which is forecast to reach US$5.41 billion this year from US$5.02 billion back in 2020 according to Gartner, a tech consultancy firm.
It does not track market share, but analysts cite Zoom and Cisco as the leaders. Goldman Sachs advised Zoom and Qatalyst Partners advised Five9.