Zendesk for Sale? Will Private Equity Buy Cloud ITSM and CRM Software Provider?

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Zendesk is exploring a potential company sale, and at least three private equity firms are giving the company a look, reports suggest. Zendesk, a cloud-centric IT service management (ITSM) and CRM software provider, has previously attracted buyout interest from Thoma Bravo and other private equity firms.

Although Zendesk is growing, the cloud software provider faces concerns from shareholder activists who believe the company has been mismanaged. Among the Zendesk developments and factoids to keep in mind:

Potential Zendesk Buyers: Private Equity of Software Companies?

Amid that backdrop, Qatalyst Partners — working on behalf of Zendesk — apparently has reached out to software companies and private equity firms to explore a potential Zendesk company sale, Bloomberg said. Private equity firms such as Thoma Bravo, Hellman & Friedman, Advent International Corp. and Permira previously expressed interest in the business, but it’s unclear if those companies or others are in active M&A talks with Zendesk.

Thoma Bravo, for one, is deeply familiar with Zendesk’s ITSM market focus. Indeed, the private equity firm has investments in ConnectWise and N-able — both of which have experience product categories such as Professional Services Automation (PSA) and help desk ticketing software.

We don’t know if additional private equity firms that have MSP software experience — names like Insight Partners, Summit Partners and Vista Equity Partners, among others — will give Zendesk a look. Many of those private equity firms currently back sales automation software companies. Examples include:

In terms of strategic software companies, Adobe apparently is not interested in buying Zendesk, CNBC reported in February 2022.

Zendesk Business and Revenue History, Cloud Software Evolution

Zendesk has grown through direct sales, channel partners and via acquisitions. Key moves include:

  • 2019: Zendesk acquired Smooch Technologies Holdings for omnichannel communications in 2019. The result: Zendesk’s core IT service management and CRM platforms can connect more easily and seamlessly with customers through apps like WhatsApp, WeChat, Line, and Messenger, along with email and SMS.
  • 2018: Zendesk acquired FutureSimple and Base, a salesforce automation software platform for small businesses. The move further blurred the line between IT service management (ITSM) and sales team automation tools in the SMB market — a major trend involving multiple vendors and customer verticals.

Meanwhile, Zendesk has continued to grow top-line revenues, though bottom-line profits are a different story. For the quarter ended December 31, 2021:

  • Zendesk’s revenue was $375.4 million, up 32% compared to the corresponding quarter in 2020.
  • GAAP net loss was $61.9 million.

Blog originally posted April 19, 2022. Updated thereafter to reflect more M&A chatter.

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