Zoom Video Communications Inc made its largest-ever purchase, a $14.7 billion all-stock deal to buy cloud-based call center operator Five9 Inc, as competition in its core videoconferencing market heats up.
In the year following the coronavirus outbreak, the teleconferencing services provider has become a household name and an investor favorite, as businesses and schools have used its services to organize virtual lessons, office meetings, and social gatherings.
As major rivals like Facebook and Alphabet's Google ramp up their video offerings, the San Jose, California-based startup is now focusing on its two-year-old cloud-calling product Zoom Phone and conference-hosting product Zoom Rooms.
Zoom said in a statement on Sunday that the acquisition will “help enhance Zoom's presence with enterprise customers and allow it to accelerate its long-term growth opportunity by adding the $24 billion contact center market.”
By integrating Five9's business customers and merging its contact center software to maximize customer interactions across channels, the purchase will supplement Zoom Phone, an alternative to legacy phone options.
According to the company's website, customers include Under Armour, Lululemon Athletica Inc, and Olympus Corp.
Five9 will become an operating unit of Zoom, and its CEO, Rowan Trollope, will become a president of the firm, keeping on as the unit's leader when the purchase closes in the first half of 2022, according to the company.
Five9 owners would get 0.5533 shares of Zoom's Class A common stock for each share of Five9, according to the agreement, which was approved by the boards of both businesses.
Based on the closing share price of Zoom Class A common stock on July 16, this equates to a price of $200.28 per share of Five9 common stock, or a nearly 13 percent premium, and an implied deal value of $14.7 billion.
Zoom's stock increased 1.4 percent to $361.97 on Friday, putting the firm at about $106 billion. Zoom went public in 2019.
Zoom's revenue increased 45 percent in the last year, as conferencing platforms such as Cisco Systems Inc's Webex and Microsoft Teams saw a boom in use as a result of the coronavirus pandemic, which has prompted a seismic shift to online working, learning, and socializing.
According to Gartner, global spending on cloud-based conferencing is expected to reach $5.41 billion this year, up from $5.02 billion in 2020. Although it does not keep track of market share, analysts say Zoom and Cisco are the market leaders.
Zoom was advised by Goldman Sachs, while Five9 was advised by Qatalyst Partners.