Flashback: earlier this year, Zoom agreed to acquire Five9 for a total of $14.7B in an all-stock deal to take advantage of Zoom's sky-high valuation at the time. The acquisition was essential for Zoom to move into a broader enterprise communication and collaboration platform. Five9 will nicely complement Zoom's current offering with CCaaS capabilities while strengthening its UCaaS and Video business altogether. Investors viewed the transaction positively as it will offset Zoom's SMB churn and turn it into an enterprise communications leader.

Unexpected Turn: On September 30, both parties agreed to walk away from the deal. Five9 voters voted against the transaction. U.S. regulators previously have raised questions over Eric Yuan's ties to China as Zoom stored encryption keys in China. Five9's proxy advisor ISS recommended a vote against the acquisition. "The all-stock deal exposes Five9 shareholders to a more volatile stock whose growth prospects have become less compelling as society inches towards a post-pandemic environment." Zoom, on the other hand, instead of raising the bid as the market expected, decided to walk away for good.

Other Implications for Zoom: While it would have been nice if the deal passed, the acquisition is not the only option for Zoom to enter CCaaS. In Zoom's recent product demo event, the management showcased its Video Engagement Center capability, which is expected to see more adoption down the road. However, building a truly robust CCaaS solution will require significant investments, especially if Zoom decides to make it organically.