When someone comes knocking on your door holding a $17 billion check, you have no choice but to welcome them in for a chat. Zendesk’s board of directors, however, rejected the same offer this week from a group of private equity investors, claiming that it undervalued the company. They said in a statement that they were required to evaluate such an offer, but that after doing so, they were confident in their decision to reject it:
“In accordance with its fiduciary obligations, 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 after careful review and consideration in consultation with its independent financial and legal advisors.”
According to the Wall Street Journal, the company may face a shareholder dispute over private equity investment in its business, as well as its efforts to close the acquisition for the company that owns SurveyMonkey, so the situation may not be resolved with management’s rejection of this specific offering. Zendesk made the proper option in rejecting the offer, according to Jess Hoyos, principal consultant at Cx2 Advisory, which monitors the customer experience (CX) industry in which the firm competes.
“Rejecting the buyout deal was a wise decision,” Hoyos told TechCrunch. “Due to their integration with WhatsApp and good marketing, their expansion in Latin America has been a success.” In the future, I anticipate them being worth more than $17 billion.” Zendesk’s primary product is help desk software, although it has recently moved into other sectors. Zendesk Suite, which combines Zendesk Support, Guide, Chat, and Talk into a single package, was just published. It’s been a success, with the corporation saying that it generated $500 million in ARR in its first year, accounting for 35% of overall ARR.
Momentive, the owner of SurveyMonkey, was purchased by the business last fall, offering it a more direct path into customer experience. Zendesk invested more than $4 billion in Momentive in the hopes of expanding its market in the future. That predicted growth is a significant reason it turned down the private equity offer, but it’s also a source of contention among activist investors who don’t like the company’s current course.