Customer-focused software company Zendesk is set to acquire SurveyMonkey’s parent company, Momentive, in a transformative deal that will allow the combined company to be a customer intelligence company, providing valuable tools for businesses throughout the customer relationship and help them better understand their consumers.
Zendesk, Inc. (NYSE: ZEN) will acquire Momentive Global Inc. (Nasdaq: MNTV) for $4 billion in a deal announced October 28. Pursuant to the agreement, Momentive stockholders will receive 0.255 shares of Zendesk for each share of Momentive, the equivalent of about $28 per outstanding share of Momentive stock based on a 15-day volume weighted average price of Zendesk’s stock. Subsequently, Zendesk stockholders will own approximately 78% of the combined company, while Momentive stockholders will own approximately 22%.
Zendesk said it anticipates the acquisition will be growth accretive in the first full operating year and will accelerate Zendesk’s revenue to 3.4 billion in 2024, one year sooner than its prior goal. Zendesk will also use the savings from the transaction to support growth opportunities. According to the filing, the transaction will qualify as a tax-free reorganization for the purpose of U.S. federal income taxes.
Both companies’ customer bases and complementary capabilities and offerings are expected to expand product usage and sales opportunities. Accordingly, the transaction will allow them to create a new customer intelligence company, allowing companies to “build more meaningful relationships with customers.” As noted in the press release, “(w)ith Momentive, Zendesk will create what businesses really need(,) a customer intelligence company that connects what customers say and do, with how they think and feel.” As a result, the combined company will allow Zendesk to get feedback on customer service and collect important data about these interactions. Therefore, companies will now be able to listen to their customers, develop a better picture and act on this insight.
The reverse triangular merger is expected to close in the first half of 2022. It is subject to approval by both companies’ respective stockholders, other regulatory approval and customary closing conditions. The transaction has already been approved by the boards of each company.
Momentive CEO Zander Lurie will continue with the company upon closing.
Zendesk’s reported Q3 2021 earning was $347 million in revenue, a 32% increase year-over-year; full year 2021 revenue will be approximately $1.3 billion, according to an investor presentation. Momentive’s preliminary Q3 2021 earnings reported $114.8 million in revenue, a 20% year over year increase, which exceeded the prior guidance range of $112.5 million to $114.5 million.
Zendesk’s lead financial advisor is Goldman Sachs & Co. LLC along with Centerview Partners LLC, while Hogan Lovells US LLP is Zendesk’s legal counsel. Momentive’s financial advisors are Allen & Company LLC and J.P. Morgan Securities LLC and its legal counsel is Wilson Sonsini Goodrich & Rosati.
The stock market was not favorable to either company after the deal was announced last Thursday, October 28. When the market closed the next day, Zendesk was down about 15% to $101.80 and Momentive was down about 8% to $22.92. Approximately a week after the announcement, Zendesk is struggling to get to pre-announcement levels of $124.95 and $122.66 on October 26 and 27, respectively; as of closing on November 3, its stock price was $104.06. Meanwhile, Momentive’s stock was $24.86 and $24.56 on October 26 and 27, respectively, and as of November 3 the stock was $22.81.
SurveyMonkey, which launched in 1999, rebranded to Momentive in June of this year, noting it would better reflect its catalogue of experience management services. In addition to SurveyMonkey, Momentive also has GetFeedback (a mobile survey tool) and a market research portion of the company.