Zendesk this morning agreed to sell itself to an investor association for $10.2 billion in cash, or $77.50 per share. The deal comes months after the US software company turned down a $17 billion offer.
The Zendesk saga of 2021 and 2022 is complicated, full of twists and turns. It’s ending its life as a public company by selling it at a discount to a deal it turned down earlier this year, underscoring both how quickly the market has eroded the value of software revenue, and the falling stock price could prompt management decisions today to lead. Which goes against the approach taken by the same leadership team a few quarters ago.
Let’s go through a refresher on the deal, discuss the final price in light of Zendesk’s latest earnings results, and conclude with a quick crackdown that portrays the transaction for unicorns and smaller public tech companies alike. could.
How did Zendesk get here?
Today’s news doesn’t seem to bode well for SaaS companies, but Zendesk faced several difficult challenges throughout the year that led to its ominous demise. First, it turned down a $17 billion bid in February, a move we reported at the time that greatly saddened active investment firm Jana. While Jan was furious, Zendesk continued to operate based on its own sense of worth — one that, incidentally, TechCrunch agreed with in our analysis of this rejected deal.
If Zendesk thought it was overpriced, why sell it? But there was more going on.
Around the same time, Zendesk was attempting to strike a deal to buy Survey Monkey’s parent company, Momentive, for $4.1 billion. Zendesk believed the deal would accelerate revenue over the long term and push the company into a growing area of customer experience. Once again, Go wasn’t happy, and it and other investors turned down the deal, leaving Zendesk in an awkward position with no immediate ability to generate the expected revenues from this deal.
The Zendesk executive returned to the drawing board and completed a strategic review two weeks ago, vowing to remain independent at the time, a move that led to a small drop in Wall Street’s stock value. It stood until this morning when the company decided selling was the best move.
Does the price make sense?