• Email Us: [email protected]
  • Contact Us: +1 718 874 1545
  • Skip to main content
  • Skip to primary sidebar

Medical Market Report

  • Home
  • All Reports
  • About Us
  • Contact Us

Analysis: Zoom’s abandoned Five9 deal shows hurdles to expansion

October 4, 2021 by David Barret Leave a Comment

October 4, 2021

By Krystal Hu, Svea Herbst-Bayliss and Echo Wang

(Reuters) – Zoom Video Communications Inc’s aborted $14.7 billion acquisition of call center software firm Five9 Inc has spotlighted issues that will weigh on the virtual meeting giant’s next attempt to expand through dealmaking, analysts and investment bankers said.

Zoom’s unwillingness to add cash to its bid and rely solely on its stock as currency to pay for the Five9 deal backfired after its shares slipped by as much as 29% in the weeks after the deal was announced in July, on concerns that the return to physical meetings as the COVID-19 pandemic wanes will erode its business.

Five9 shareholders voted down the deal last week.

Investment bankers and analysts said Zoom’s stock would likely remain volatile until investors establish what the prospects of its business will be once the pandemic is over. This decreases the chances of another acquisition target accepting Zoom’s shares as currency in the near term, they said.

Zoom carries almost no debt but it had only $2 billion in cash as of the end of July, which it needs to fund growth initiatives.

“Zoom has to figure out how to keep some of the customers that signed up as individual subscribers that may not need Zoom when they return to more physical lives,” said Alex Zukin, an analyst at Wolfe Research.

Zoom declined to comment.

Another hurdle that could give the next company that will attract Zoom’s acquisition interest pause is its ties to China. U.S. prosecutors charged a former China-based Zoom executive last year with disrupting video meetings commemorating the 31st anniversary of the Tiananmen Square crackdown at the request of the Chinese government.

A U.S. Justice Department-led committee said last month it was reviewing Zoom’s proposed acquisition of Five9 to see if it “poses a risk to the national security or law enforcement interests.”

While Five9 shareholders voted down the Zoom deal before that review concluded, analysts said the regulatory intervention exposed a risk that will continue to weigh on the minds of other acquisition targets.

“The U.S. government is likely to give increased scrutiny to transactions involving companies with engineering talent or other operations in China,” said Sujit Raman, a former U.S. Associate Deputy Attorney General who is now partner at law firm Sidley Austin LLP specializing in government investigations.

ACTIVIST HEDGE FUNDS

Zoom sought to acquire Five9, whose call center software is used by more than 2,000 companies across the globe to interact with their clients, offering more products beyond its flagship teleconferencing. Without any transformative acquisition, Zoom shareholders are likely to grow anxious over the company’s reliance on virtual meetings, whose popularity has peaked, some investors said.

Dianne McKeever, chief investment officer of investment firm Ides Capital Management said it was possible that an activist hedge fund would seek to take advantage of the situation by amassing a stake in Zoom and push for changes.

“When a deal falls apart, forced selling by often short-term focused, event driven funds can create an outsized valuation opportunity for a long-term investor,” McKeever said.

Examples of companies that attracted the wrath of investors after botching an acquisition attempt abound. Hedge fund TCI Fund Management, one of the biggest investors in Canadian National Railway Co, is calling on the railroad’s CEO to resign following its failed $29 billion acquisition bid for Kansas City Southern.

Activist hedge funds Starboard Value LP and Elliott Management Corp have amassed stakes in Willis Towers Watson Plc, whose $30 billion merger with insurance broker Aon Plc was called off earlier this year because of objections from U.S. regulators.

To be sure, Zoom’s stock may be expensive for some activist hedge funds, analysts said. It is also not obvious whether there would be an acquirer for Zoom, which is something some activist hedge funds might push for.

Still, a failed deal can be interpreted by some investors as a signal by a company’s board that it cannot unlock more value, said Lawrence Elbaum, co-head of law firm Vinson & Elkins LLP’s shareholder activism practice.

“This immediately makes their board seats vulnerable in an activism campaign,” Elbaum said.

(Reporting by Krystal Hu, Svea Herbst-Bayliss and Echo Wang in New York; Additional reporting by Eva Mathews and Nivedita Balu in Bengaluru; Writing by Anirban Sen; editing by Diane Craft)

Source Link Analysis: Zoom’s abandoned Five9 deal shows hurdles to expansion

David Barret
David Barret

Related posts:

  1. HPE signs multi-billion dollar NSA computing deal
  2. EU’s chief executive warns against ‘pandemic of the unvaccinated’
  3. Ghana’s economy grew by 8.9% in second quarter, president says
  4. U.S. chipmaker Micron forecasts first-quarter revenue below estimates

Filed Under: News

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

  • Are Space-Made Medicines The Future? Find Out More In Issue 38 Of CURIOUS – Out Now
  • An Alien-Like Fish With A See-Through Head And Green Eyes Lurks In The Ocean’s Dark Depths
  • Africa Wants To Change Misleading World Map, The “Wow!” Signal Was Likely From An Extraterrestrial Source, And Much More This Week
  • A “Good Death”: How Do Doctors Want To Die?
  • People Are Throwing Baby Puffins Off Cliffs In Iceland Again – But Why?
  • Yet Another Ancient Human Skull Turns Out To Be Denisovan
  • Gen Z Might Not Be On Course For A Midlife Crisis – Good News, Right? Wrong
  • Glowing Plants, Punk Ankylosaur, And Has The Wow! Signal Been Solved?
  • Pulsar Fleeing A Supernova Spotted Where Neither Of Them Should Be
  • 20 Years After Hurricane Katrina: Is It Time For A New Approach To Hurricane Classification?
  • Dog Named Scribble Replicates Quantum Factorization Records – So We Tried It Too
  • How Old Is The Solar System? (And How Can We Tell?)
  • Next Week, A Record-Breaking Over 7 Billion People Will See The Total Lunar Eclipse
  • The Goblin Shark Has The Fastest Jaws In The Ocean, Firing Like A Slingshot At Speeds Of 3.1-Meters-Per-Second
  • We Thought Geological Boundaries Were Random. Now, A New Study Has Identified Hidden Patterns
  • Do Fish Sleep?
  • The Biblical Flood Myth That Inspired Noah’s Ark Had A Sinister Twist
  • Massive Review Of 19 Autism Therapies Finds No Strong Evidence And Lack Of Safety Data
  • Giant City-Swallowing Cracks In Earth’s Surface Are A “New Geo-Hydrological Hazard”
  • Three Incredible Telescopes Looked At The Butterfly Nebula To Learn Where Earth Came From
  • Business
  • Health
  • News
  • Science
  • Technology
  • +1 718 874 1545
  • +91 78878 22626
  • [email protected]
Office Address
Prudour Pvt. Ltd. 420 Lexington Avenue Suite 300 New York City, NY 10170.

Powered by Prudour Network

Copyrights © 2025 · Medical Market Report. All Rights Reserved.

Go to mobile version