Lessons in Takeover Strategy: Zendesk-Momentive Edition

If there’s a next season of “Billions,” the writers may want to pivot to the enterprise software world, focusing on what has to be the most drama-laden takeover deal in recent memory. That would be Zendesk’s bid to buy Momentive Global, the company formerly known as SurveyMonkey. This software soap opera hasn’t received a lot of mainstream media coverage, presumably because neither company is a household name. But it’s worth contemplating simply as a master class in how not to run a takeover.

Lesson one might be that if you’re going to try to buy a company using your own shares as currency, make sure your shareholders are on your side. Zendesk faces public opposition to its all-stock bid for Momentive from some of its own investors, including Jana Partners, an activist investor and, more significantly, Janus Henderson Investors, a British money manager that is one of its biggest shareholders. In this letter, Janus said it was “gravely concerned about the strategic, tactical and financial rationale of the proposed deal.” Ouch. It’s no coincidence Zendesk’s price tanked when it announced the deal in late October.