The video conferencing platform company Zoom announced on Sunday about its acquisition of cloud center company Five9 for USD 14.7 Billion. This is the company’s biggest-ever acquisition since its inception in 2012. The California-based company’s ambitious move to buy the 20-years old Five9 comes amidst the stifling completion in the video conferencing market.
The deal between the two companies is anticipated to be completed by the first half of 2022. Zoom wrote in a tweet that “We have signed an agreement to acquire @Five9. Together we will build the customer engagement platform of the future.” According to the data from Factset, the acquisition will mark the second-biggest tech acquisition in the US. In April, Microsoft bought speech recognition firm Nuance for USD 16 Billion.
Zoom’s purchase will help the company to enter USD 24 Billion cloud call center market. “We are continuously looking for ways to enhance our platform, and the addition of Five9 is a natural fit that will deliver even more happiness and value to our customers,” said Eric S. Yuan, CEO of Zoom, in a blog post. The new business unit of the company will complement its latest Zoom Phone offering, as Zoom would be able to cross-sell their products to the existing Five9 customers. Under the agreement, Five9 shareholders will receive 0.5333 shares of Class A stock of Zoom Video Communications.
“Zoom is built on a core belief that robust and reliable communications technology enables interactions that build greater empathy and trust, and we believe that holds particularly true for customer engagement. Enterprises communicate with their customers primarily through the contact center, and we believe this acquisition creates a leading customer engagement platform that will help redefine how companies of all sizes connect with their customers. We are thrilled to join forces with the Five9 team, and I look forward to welcoming them to the Zoom family,” said Eric S. Yuan in a statement.
Since the company’s listing on NASDAQ, its stock price has jumped 400%; however, it tanked 36% after reaching a peak in October. After witnessing a 326% jump in revenue in 2020 due to the pandemic, its revenue observed a slide owing to the opening of corporates and increasing competition from companies such as Microsoft and Cisco.
Five9’s Executive Statement on Acquisition
“It has always been Five9’s mission to make it easy for businesses to fix that problem and engage with their customers in a more meaningful and efficient way. Joining forces with Zoom will provide Five9’s business customers access to best-of-breed solutions, particularly Zoom Phone, that will enable them to realize more value and deliver real results for their business. This, combined with Zoom’s ‘ease-of use’ philosophy and broad communication portfolio, will truly enable customers to engage via their preferred channel of choice,” said Rowan Trollope, CEO of Five9, said in a press release.
Five9’s business has grown rapidly amidst the COVID-19 pandemic, as companies had to quickly adapt cloud software solutions, including call centers. Last year, the company generated USD 435 Million in revenue, while it reported USD 137.88 Million in revenue in the first quarter of 2021, a jump of 27.6% since last year. The firm has also signed the two biggest deals that would generate USD 20 Million in combination annually. On Friday, Five9 closed with a market capitalization of USD 11.9 Billion. Thus, the deal between Zoom and Five9 acclaims that the former company has bought the latter one with a share price of USD 200.28/ per piece. Five9 represents a 14% market share of Zoom, which is about USD 107 Billion.
The USD 14.7 Billion worth deal brings two former Cisco executives together. For instance, Eric S. Yuan left Cisco to found Zoom, while Trollope became part of Cisco after serving Symantec for 22 years. During his tenure at Cisco, he eventually spearheaded all of Cisco’s collaboration products. In 2018, he left the company and joined Five9 to take the CEO position.