[Software] Zoom's Abandoned Five9 Deal Shows Hurdles to Expansion

[[M]anuel]

Zoom's unwillingness to add cash to its bid and rely solely on its stock as currency to pay for the Five9 deal backfired.

 

 

Zoom's aborted $14.7 billion (roughly Rs. 1,09,280 crores) acquisition of call centre software firm Five9 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 percent 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 (roughly Rs. 14,865 crores) 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.