Zoom Five9 Deal Called Off
Zoom Terminates Acquisition of Five9
The proposed acquisition of Five9, a cloud-based customer service software company, by Zoom Video Communications has been called off. This deal, initially announced in July, aimed to allow Zoom to expand into the contact center market.
Challenges Leading to the Termination
Several factors contributed to the decision to terminate the merger. A decline in Zoom’s stock price significantly reduced the deal’s value, which was initially estimated at $14.7 billion.
The stock, which experienced substantial growth in recent years, faced increasing downward pressure. Zoom’s share price dropped from approximately $360 at the time of the announcement to around $260 per share currently.
National Security Concerns
Further complicating matters, a U.S. Justice Department panel initiated an investigation into the potential national security risks associated with the acquisition. These concerns stemmed from Zoom’s connections to China.
Zoom’s founder, Eric Yuan, is a naturalized U.S. citizen originally from China, having immigrated to the United States in 1997.
Past Issues and Commitments
Previously, Zoom acknowledged mistakenly routing some meetings through Chinese servers. The company also deactivated the account of an activist utilizing the platform to commemorate the Tiananmen Square crackdown.
Zoom has stated that a significant portion of its development team is located in China, a common practice for many global companies. The company previously affirmed its commitment to preventing requests from the Chinese government from affecting users outside of mainland China.
Shareholder Concerns and ISS Recommendation
A key factor in the termination was a recommendation from Institutional Shareholder Services (ISS), a proxy advisory firm. ISS advised Five9 shareholders to vote against the acquisition due to concerns regarding Zoom’s decelerating growth.
This advice appears to have been influential, as Five9 subsequently released a statement confirming the merger plan had been “terminated by mutual agreement.”
Zoom’s Perspective
Zoom released its own statement, minimizing the significance of the failed acquisition. Founder Eric Yuan emphasized that while Five9 presented an appealing opportunity for an integrated contact center offering, it wasn’t essential to the success of their platform.
He added that alternative solutions for providing customers with a robust contact center experience were available.
Market Reaction
The termination of the deal was largely anticipated by the market. Following the news, the share prices of both Zoom and Five9 remained relatively stable, indicating that the outcome had been factored into investor expectations.
