Zoom, the video-conferencing platform that exploded in popularity during the Covid-19 pandemic, is investing $14.7 billion in cloud-based software company Five9 in order to broaden its appeal among business clients.
Zoom (ZM) made the announcement late Sunday night. The move will “help enhance Zoom’s presence with enterprise customers and allow it to accelerate its long-term growth opportunity,” according to a statement.
Over 2,000 clients use Five9 software in their customer service centers around the world.
Five9 (FIVN) shareholders will receive about 0.5 of a share of Zoom’s Class A common stock for each Five9 share they own under the all-stock deal.
The addition of Five9, according to Zoom’s billionaire CEO and founder Eric Yuan, was a natural fit.
“Enterprises communicate with their customers primarily through the contact center, and we believe this acquisition creates a leading customer engagement platform that will help redefine how companies of all sizes connect with their customers,” he said in a statement.
The deal “seems intended to expand the company’s enterprise offerings and relationships, as well as its total addressable market,” according to Scott Kessler, a Third Bridge analyst who leads technology, media, and telecommunications coverage.
“It’s worth noting this would be by far Zoom’s largest ever M&A deal … perhaps designed to make an impact from a diversification perspective,” Kessler told CNN Business.
Zoom announced plans to buy Kites, a German company that develops real-time machine translation, in June. The deal’s terms were kept under wraps.
One of the pandemic’s biggest success stories has been Zoom, a 10-year-old company based in San Jose, California.
The company was valued at nearly $16 billion just two years ago. Its market capitalization has since risen to around $106.7 billion.
While the coronavirus crisis helped Zoom become a household name, the company is now under pressure to find new growth opportunities as economies recover and the demand for remote conferencing declines.
Despite its rapid growth, analysts predict that Zoom will need to add new features in the future to entice more people to pay for its services.
The company’s most recent acquisition enables it to enter a completely new market: customer service centers. Zoom stated on Sunday that it aimed to “build the customer engagement platform of the future,” estimating that it would be entering a “$24 billion contact center market.”
The two companies will hold a Zoom call on Monday to discuss the deal in greater detail.
