Amidst the news of everything else going on in Capitol Hill right now, there was one big M&A development worth mentioning. As it turns out, one of the largest proposed buyouts in 2021 might not be going through after all. Zoom (NYSE: ZM) had made news earlier when it said it aimed to buy out Five9, a massive contact center company. While many expected the original acquisition would go through, it seems like that didn’t happen after all.
When put to the vote, Five9 shareholders voted against agreeing to the buyout offer. Despite offering more than $15 billion to buy the company, shareholders still preferred to keep the Five9 private. Five9 said in a statement that it would continue to offer contact center services to Zoom as an independent client.
The news came after an independent advisory firm, Institutional Shareholder Services, recommended Five9 shareholders not to go through with the buyout. The main concern was that Zoom’s growth has slowed down in recent years. Additionally, with vaccines and lockdowns now a thing of the past (mostly), companies are going back to traditional, in-person meetings over Zoom calls, and it seems hard to see why Zoom call demand would go up right now.
The deal even drew scrutiny from U.S. regulators as well. The Justice Department was supposedly investigating the proposed merger on its own, largely due to Zoom’s extensive ties with China. Even if Five9 shareholders approved of the deal, it’s likely that regulators might have forbidden it anyway.
“We had the opportunity to engage extensively with our shareholders since our transaction announcement. We greatly appreciate their feedback and confidence in Five9’s future prospects and share their views regarding the significant potential for value creation as a standalone company,” said Five9 CEO Rowan Trollope in a statement.
The news is a big blow to Zoom’s future growth plans. The company has lowered sales guidance for the upcoming quarters as small businesses are relying less on teleconferencing services. The Five9 acquisition was meant to help Zoom break away from relying just on teleconferencing and expand into the domain of cloud-based contact center software.
Shares of Zoom were actually up on the news by 2.5%, while Five9 dipped by around 1.5%. Generally, big buyouts tend to see a drop in share price from the buyer, who’s making a massive commitment. It’s no surprise Zoom’s stock is up on the news, as it can use that $15 billion in cash for something else.
On Wall Street, the sentiments surrounding Zoom remain mixed. There are 13 analysts that are bullish, while 12 are neutral. Only one is bearish at the moment. Since the start of 2021, Zoom’s stock has plummeted more than 27.4%.
Zoom Video Communications Company Profile
Zoom Video Communications provides a communications platform that connects people through video, voice, chat, and content sharing. The company’s cloud-native platform enables face-to-face video and connects users across various devices and locations in a single meeting. Zoom, which was founded in 2011 and is headquartered in San Jose, California, serves companies of all sizes from all industries around the world. – Warrior Trading News
