Zoom Flexes Muscle with $15 Billion Buy of Five9


By: R. Scott Raynovich

Rich equity is a nice luxury -- it allows companies with generous stock-market valuations to make opportunistic acquisitions. This appears to be the case in Zoom's announced $15 billion deal to purchase Five9 Inc.

In an all-stock deal, Zoom will acquire the call-center company in its largest-ever acquisition, making use of its $105-billion market capitalization. Zoom has about $4 billion in projected revenue for its fiscal year 2022 (its fiscal year will end in January 2022). Five9 stockholders will receive 0.5533 shares of Zoom stock for each share of Five9. To compare, Five9 has about $500 million in revenue.

Conferencing Diversification Play

Five9 says its call centers are used by more than 2,000 international clients. Customers include Under Armour (UAA), Lululemon Athletica Inc (LULU), and Teledoc (TDOC).

This deal also offers opportunities to integrate Zoom's cutting-edge video technology with Five9's call-center offerings. On the face of it, Zoom is buying an attractive revenue source as well as a customer footprint that could help it diversify its customer base and ramp revenue.

"The acquisition is expected to 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," Zoom said in a statement issued when the deal was announced on Sunday evening.

Conclusion: Smart Deal for Zoom

The strategy makes sense: Zoom clearly has its eyes on cross-selling into Five9's customer base, giving them more conferencing and meeting tools. It's now looking to beef up its product portfolio with larger, integrated offerings from companies such as Microsoft (Teams).

Overall, this looks like a smart deal that could benefit both companies with a merger that gets them more scale.

Both Five9 and Zoom have been large beneficiaries of the COVID-19 pandemic, as businesses step up their race to digitize and support remote work.