'Plan B' it is for Zendesk as shareholders reject $4 billion Momentive takeover

Earlier this month, Zendesk CEO Mikkel Svane declared that the firm was doubling down on its push to secure shareholder approval for its planned $4 billion takeover of Momentive Global, parent company to SurveyMonkey:

We are very, very focused on the upcoming transaction here and getting the vote.

Flash forward a few weeks and that vote didn’t come down in his favor after all as Zendesk shareholders failed to get behind the deal, although Momentive investors did.

Zendesk certainly can’t be accused of not trying to win over its shareholders, producing a strategic rationale document that made a strong case for the deal as part of the firm’s overall ambition to become a $5 billion firm by 2025.

But the proposed takeover faced opposition from a number of key activist investors and advisory firms, including Jana Partners, Neuberger Berman, TIG Advisors and Janus Henderson. In the event, their counsel won out, leaving Svane to confirm in a statement:

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.

So with that decision made, what comes next? What’s 'Plan B'? Earlier in the month, Svane said:

We have a strong operating plan for '22 and we're going to continue to execute on that, that's for certain. And if, for one reason or the other, the deal doesn't go through, we're going to continue to execute on our vision about building customer intelligence. But the path is going to be different and we'll have to kind of revisit some of our strategies there. 

Following the shareholder rejection, he expanded on what the next steps will now be in a blog post entitled Looking ahead to the future in which he said:

We planned to acquire Momentive as a way to accelerate our ability to deliver the future of customer intelligence. While we will not be moving forward with that acquisition, we remain as committed as ever to helping our customers get more value out of their data. We’ll continue developing products that enable our customers to listen, understand and then improve every interaction along their customer’s journey. 

He added:

There’s no question customers are rightfully demanding more from the companies and brands with whom they spend their time and money. The Zendesk platform is already a cornerstone for many businesses worldwide, and I am extraordinarily proud of our growth — that’s why we saw accelerated revenue growth of 30% to $1.34 billion in revenue in 2021 and have a clear path to generating $3.4 billion in revenue by 2025. We will continue to play a critical role in transforming these relationships, just as we have for the last 15 years. We are operating from a strong foundation and driven by a mission to simplify complexity so it’s easier for companies and customers to connect.

My take

I am so excited for what the future holds.

I don’t doubt that for a second, but for Svane it’s clearly going to be a bittersweet sort of excitement, given his enthusiasm for the Momentive gambit. For my part, it looked like a bold roll of the dice, but the shareholders have spoken and as a public company that’s what counts, so ‘Plan B’ it is.

The blog posting cited above is in reality as much a sort of ‘report card’ cum holding statement and affirmation of values - keep on keeping on!

But there will inevitably be more speculation to come over the prospect of a potential future takeover. The firm has already rejected one unsolicited offer which it felt undervalued the company. Whether more suitors are out there remains to be seen.

But the growth path that the firm is on and the success of the Zendesk Suite offering to date suggests that Zendesk is more than capable of continuing on an upward trajectory under its own steam.

Onwards!