JANA Partners slams Zendesk’s proposed Momentive acquisition
Zendesk investors launch a savage public attack on the deal.
In an unusual move, investment firm JANA Partners LLC has publicly released a letter to the Zendesk Board of Directors strongly advising against the proposed acquisition of Momentive. Describing itself as a “significant shareholder” in Zendesk (along with partners), JANA Partners describes the acquisition as lacking financial merit and strategic logic and coming with a “high degree of execution risk for Zendesk shareholders.”
Indeed, immediately following the announcement of the proposed acquisition on October 28, Zendesk’s shares fell sharply against a background of criticism by analysts. Momentive is an AI-powered insights solution built around Survey Monkey, the flagship survey platform.
Among JANA Partners’ specific objections are:
- The clash between Zendesk’s strategy of securing enterprise customers and the former Survey Monkey’s SMB customer base;
- The likelihood that the acquisition will dilute Zendesk’s potential for standalone growth;
- The possibility of creating a deeper integration with Momentive rather than seeking to own it; and
- Issues Zendesk was having with execution within its own business, prior to the announcement.
Then it gets personal, asking if the friendship between the Zendesk and Momentive CEOs has been a factor or if the Board is not “sufficiently engaged” to protect shareholder interests.
Why we care. Obviously this is not the first time investors have publicly challenged a company’s strategy. Those who covered it will not have forgotten the buffeting Marissa Mayer took at Yahoo from activist investors. But it’s unusual, at least in the marketing tech space, to read such a savage and personal critique. But as JANA Partners points out, the market seems to agree.