Video conference company Zoom Communications (NASDAQ:ZM) has announced that it is buying Five9, a provider of cloud contact centre software, in an all-stock transaction valued at $14.7 billion U.S.
The deal marks Zoom’s first billion-dollar acquisition and comes as the company prepares for a post-pandemic world where employees return to the office. It’s the second-biggest U.S. technology deal this year, behind Microsoft’s (NASDAQMSFT) planned $16 billion U.S. purchase of Nuance Communications.
Five9’s stock closed last Friday (July 16) with a market capitalization of $11.9 billion U.S., or $177.60 U.S. a share. Zoom said Five9 stockholders will receive 0.5533 shares of Zoom Video for every Five9 share. That values Five9 at $200.28 U.S. a share, a 13% premium, and represents about 14% of Zoom’s market capitalization of close to $107 billion U.S.
Zoom has been among the top growth stocks over the past 18 months as the pandemic caused a shutdown of offices across the globe, forcing workers to communicate from remote locations.
After expanding revenue by 326% in 2020, Zoom faces a slowdown, especially as companies reopen and face-to-face meetings resume. While the company has launched new products to cope with coming changes to its business, the company is now so big that organic growth alone is unlikely to satisfy Wall Street.
The company also needs new revenue sources as Microsoft ramps up competition in video chat with its “Teams” video conferencing system. Zoom’s stock price jumped almost 400% last year, though it has dropped 36% since reaching a peak last October.
Five9 has seen rapid growth since early 2020 too as demand surged for call centre technology that would allow representatives to do their jobs from home. Companies had to quickly adapt to cloud software of all sorts, including for their contact centres. Five9's revenue climbed 33% to $435 million U.S. last year.
The transaction is expected to close in the first half of 2022. Five9 stockholders still have to approve the deal, and it requires regulatory clearance.
