Zendesk’s merger with Momentive rejected

Zendesk has made a name for itself as a service-first customer relationship management (CRM) tool. In fact, on 10 February, Zendesk was offered $17 billion for its acquisition by a consortium of private equity firms

However, the company wasn’t tempted by this offer and chose to reject it outright.

The software company stated: “Consistent with its fiduciary obligations, after careful review and consideration conducted in consultation with its independent financial and legal advisors, the board concluded that this non-binding proposal significantly undervalues the company and is not in the best interests of the company and its shareholders.”

Many attributed the rejection of this deal to be tied with Zendek’s future plans for a merger with the machine learning insight platform Momentive (formerly SurveyMonkey).  

Momentive merger fails

Zendesk believed that a deal with Momentive would take its annual revenue to $5 billion by 2025. Nonetheless, this deal has now fallen through with both parties deciding to remain independent of one another.

In a company blogpost, Momentive CEO Zander Lurie, discussed why the proposed deal had come to an end: “While we are disappointed that Zendesk stockholders did not vote to approve the transaction, we are confident in our go-forward strategy.

“We have a strong portfolio of products that address valuable customer needs, and our market opportunity is larger and more relevant than ever.

“We’ve always been focused on driving stockholder value and remain committed to this important objective on the journey ahead.”

Zendesk didn’t offer too much insight into why the transaction was not approved by its stockholders. But Mikkel Svane, CEO and founder of Zendesk, said: “While we were excited by the potential of this transaction to transform the customer experience and create stockholder value, we respect and appreciate the perspectives of our stockholders.”

According to Reuters, the board was also criticized by activist hedge fund Jana Partners who said on 28 February, that there was “hostility” toward viewpoints opposing the company.

Earlier in February, Jana nominated four directors to the board of Zendesk and said that the company needed to rethink its practices because of the proposed merger with Momentive.

Zendesk’s future

Looking ahead, Svane stated: “Our board and management team remain laser-focused on our strategy and execution.

“Zendesk’s business has never been stronger, with accelerated revenue growth of 30% to $1.34 billion in revenue in 2021 and a clear path to generating $3.4 billion in revenue by 2025.”

This impressive revenue is $1.6 billion less than what was projected if the Momentive merger went ahead. Despite this, Zendesk believes it is in good standing for its future projects.

Svane noted: “Zendesk’s mission is to simplify the complexity of business and make it easier for companies and customers to create connections.

“We remain focused on accelerating our rapid growth in the enterprise, continuing to lead the market with easy-to-use and innovative products and, importantly, unlocking opportunities to create value for customers by empowering them with rich, multi-dimensional customer intelligence.”

Time will tell whether Zendesk will go it alone or successful deals will be required to reach this goal.