Monday, 19 July 2021-
Zoom, the video conferencing platform whose stock grew exponentially last year, announced Sunday night that it is buying Fiver9 – a cloud-based software company – in an all-stock deal estimated to be $14.7 billion.
Zoom, considered a work-from-home stock, had earlier warned of a slowdown in growth in the next quarter. The company had anticipated that the accelerated vaccine rollout and the subsequent reopening of economies would result in a dip in the demand for its services. But to maintain the kind of growth that saw Zoom become a household name in 2020, the acquisition of Five9 is expected to accelerate the company’s growth in the post-pandemic era by ensuring:
The company diversifies its services to reach more business clients.
The world continues to embrace zoom.
Companies enhance their experiences with customers and remote workers.
The Meteoric Rise of Zoom
Zoom's all-share acquisition of Five9 would have been unthinkable two years ago when the company went public in 2019 as Zoom Video Communications Inc., at the time with a market valuation of $9 billion. The company soon became a household name with the onset of the pandemic as people and companies embraced its remote services.
Around this time last year, the price of Zoom’s shares had risen by 400%, but has since fallen back by 36% month on month since October 2020 when the price peaked. However, the company's current market valuation is estimated to be $106 billion, a milestone reached in a record time of slightly over two years. That's because the onset of the pandemic meant a global shift to work from home, hence the meteoric rise of Zoom.
What the Acquisition of Five9 Means
In a blog post, Sunday, Zoom’s co-founder and CEO Eric Yuan said that the acquisition of Five9 will add a $24 billion contact centre market, an effort that will accelerate the company’s post-pandemic growth. On the back of a slowdown in demand for its products, these diversification efforts would give Zoom greater exposure to more business clients.
Yuan added that the takeover of Five9 will complement the company's Zoom Phone, which is a cloud-based phone system that is in high demand. Moreover, Kelly Steckelberg, Zoom's chief financial officer, revealed in an interview that the deal will boost the company's appeal to its business clients.
The Terms of The Deal
While a meeting between the two firms has been scheduled for Monday to iron out final details, this is what we know so far:
The all-stock deal will give Five9's shareholders entitlement to a 0.5 per share of Zoom's stock for every share they own.
Five9 will see Zoom expand its services to enhance how enterprises interact with customers through the contact centre.
Five9 will officially become a unit of Zoom upon the conclusion of the deal, with Zoom’s CEO Rowan Trollope becoming president of Zoom as well as the CEO of Five9.
The deal will help Zoom diversify its products and meet the demands of its total addressable market, even as economies reopen and people move back to working from offices.
(Written and edited by: The Decision Maker team)