Zoom's plan to acquire cloud software company Five9 has collapsed after the latter's shareholders voted against the deal. The two companies announced that they will no longer be pushing through with the $14.7 billion all-stock deal.
Zoom initially announced its plans to acquire Five9 in July. The deal would have been the company's first billion-dollar acquisition and one of this year's largest tech deals. With the deal now in shambles, Zoom will likely now have to look for other options to broaden its software capabilities. Zoom wanted to pursue the acquisition to lessen its dependence on its core video and audio teleconferencing.
The company's founder and CEO, Eric Yuan, said that the acquisition would have been a great way for Zoom to offer integrated contact center services. He said that despite the failed deal, the collapse would in no way affect the success of its platform. Yuan added that there will be more opportunities to come.
Five9 and Zoom have an existing product partnership. The two companies said they will maintain continued business relations and support for integration. After the deal was first announced, the U.S. Department of Justice had reportedly conducted its own review over concerns of foreign participation in Zoom's operations. However, Zoom said that it still expects the deal to close despite the added scrutiny.
Sources with knowledge in the matter said Five9 shareholders had voted against the acquisition mainly because of the small premium Zoom was willing to pay for its stocks. The price Zoom was offering only amounted to about 13% above the value of the company's shares before the offer was made. Shareholders reportedly felt that the company's shares were undervalued given the momentum in the wider cloud software industry.
In comparison, Microsoft acquired Nuance Communications for $19.7 billion, which translated to about a 23% premium. Square acquired Australia's Afterpay for $29 billion, which translated to about a 30% premium.
Since the offer was made, Zoom's stock has dropped by more than 28%, while Five9's share only dropped by 11%. Given that the deal involved a stock swap, pushing through the transaction would mean that Five9 shareholders would receive even less of a premium.