ZEN Zendesk Inc

Using the Forecasts, Goldman Sachs performed an illustrative discounted cash flow analysis of Zendesk. Using a mid-year discounting convention and discount rates ranging from 10.0% to 12.0%, reflecting estimates of Zendesk’s weighted average cost of capital, Goldman Sachs discounted to present value as of March 31, 2022 (a) estimates of the unlevered free cash flows (excluding the impact of net operating losses), which are referred to as ‘‘UFCF,’’ for the second, third and fourth quarters of fiscal year 2022 and fiscal years 2023 through 2030 as reflected in the Forecasts, and (b) a range of illustrative terminal values for Zendesk, which were calculated by applying exit terminal year, next twelve months’, which we refer to as ‘‘NTM,’’ UFCF multiples ranging from 20.0x to 32.5x, to a terminal year NTM UFCF of $980 million, to be generated by Zendesk, as reflected in the Forecasts (which analysis implied perpetuity growth rates ranging from 5.0% to 8.9%).  Goldman Sachs derived the discount rates referenced above by application of the Capital Asset Pricing Model, which is referred to as “CAPM,” which requires certain company-specific inputs, including Zendesk’s target capital structure weightings, the cost of long-term debt, future applicable marginal cash tax rate and a beta for Zendesk, as well as certain financial metrics for the United States financial markets generally. The illustrative terminal value to NTM UFCF multiple range for Zendesk was derived by Goldman Sachs utilizing its professional judgment and experience, taking into account, among other things, enterprise value over NTM UFCF as of June 23, 2022 of certain publicly traded companies, as described below in the section of this proxy statement entitled “—Selected Public Company Comparables.”

Goldman Sachs derived a range of illustrative enterprise values for Zendesk by adding the ranges of present values it derived as described in the immediately preceding paragraph. Goldman Sachs then added to the range of illustrative enterprise values it derived for Zendesk $307 million, the amount of net cash of Zendesk as of March 31, 2022, and the net present value of net operating losses as reflected in the Forecasts, in each case, as provided by Zendesk management and approved for Goldman Sachs’ use by Zendesk management, to derive a range of illustrative equity values for Zendesk. Goldman Sachs then divided the range of illustrative equity values it derived by the corresponding number of fully diluted outstanding shares of Zendesk common stock, calculated using the treasury stock method, the range of which was 131 million to 132 million, as provided by Zendesk management and approved for Goldman Sachs’ use by Zendesk management, calculated using the treasury stock method, to derive a range of illustrative present values per share of Zendesk common stock ranging from $66 to $116, rounded to the nearest dollar.

 

 

Goldman Sachs performed an illustrative analysis of the implied present value of an illustrative future value per share of Zendesk common stock. For this analysis, Goldman Sachs used the Forecasts for each of the fiscal years 2022 through 2025. Goldman Sachs first calculated the implied enterprise value per share of Zendesk common stock as of December 31, for each of the fiscal years 2022 through 2024, by applying multiples of enterprise value to NTM revenue, which we refer to as “EV/NTM revenue” in this section of this proxy statement, of 4.5x to 8.0x to estimates of Zendesk’s revenue for each of the fiscal years 2023 to 2025.  These illustrative EV/NTM revenue multiple estimates were derived by Goldman Sachs utilizing its professional judgment and experience, taking into account current and historical EV/NTM revenue multiples for Zendesk during the six-month, one-year, three-year and five-year periods ending June 23, 2022, as described below in the section of this proxy statement entitled ‘‘—Historical EV/NTM Trading Multiples.’’ Goldman Sachs then added the amount of Zendesk’s forecasted net cash of $457 million, $693 million and $1,022 million as of December 31 for each of the fiscal years 2022 to, 2023 and 2024, respectively, each as provided by Zendesk management, from the respective implied enterprise values in order to derive a range of illustrative equity values for Zendesk.  Goldman Sachs then divided the results by the number of projected year-end fully diluted outstanding shares of Zendesk common stock for each of the fiscal years 2022 to 2024, calculated based on estimated annual dilution and 131 million, the number of fully diluted shares of Zendesk common stock estimated to be outstanding as of June 22, 2022, calculated using the treasury stock method, each as provided and approved by Zendesk management. Goldman Sachs then discounted the implied per share future equity values for the twelve-month periods ending on December 31, 2022, December 31, 2023 and December 31, 2024, respectively, back to March 31, 2022, using an illustrative discount rate of 10.9%, reflecting an estimate of Zendesk’s cost of equity.  Goldman Sachs derived such discount rate by application of CAPM, which requires certain company-specific inputs, including a beta for the company as well as certain financial metrics for the United States financial markets generally. This analysis resulted in a range of implied present values per share of Zendesk common stock of $64 to $124, rounded to the nearest dollar.

 

 

 

Goldman Sachs reviewed and analyzed, using publicly available information, the acquisition premia for 19 all-cash acquisition transactions announced during the time period from April 2016 through June 2022 involving a public company in the software industry as the target where the disclosed enterprise values for the transaction were greater than $1 billion.

 

 

Goldman Sachs has also provided certain financial advisory and/or underwriting services to Permira and/or its affiliates and portfolio companies from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as financial advisor to Permira Advisers (UK), an affiliate of Permira, with respect to its acquisition of a majority stake in Golden Goose in June 2020; as joint bookrunner with respect to the initial public offering by Allegro.eu, a portfolio company of Permira, of 187,826,087 of its ordinary shares in September 2020 and the public offering of 76,500,000 of its ordinary shares in March 2021; as lead left bookrunner with respect to the issuance by Lowell Financial Ltd., a portfolio company of Permira, of EUR/GBP high yield bonds (aggregate principal amount of £400,000,000 plus €1,340,000,000) in October 2020; as joint bookrunner with respect to the initial public offering by Dr. Martens plc, a portfolio company of Permira, of 350,000,000 of its ordinary shares in January 2021; as bookrunner with respect to the sale by Permira of 12,000,000 shares of TeamViewer AG, a portfolio company of Permira, in February 2021; as bookrunner with respect to the public offering by Golden Goose, a portfolio company of Permira, of its Senior Secured Notes due 2027 (aggregate principal amount of €480,000,000) in May 2021; as bookrunner with respect to the initial public offering by Clearwater Analytics Holdings, Inc., a portfolio company of Permira, of 34,500,000 of its Class A common stock in September 2021; as bookrunner with respect to the initial public offering by Informatica Inc., a portfolio company of Permira, of 33,350,000 of its Class A common stock in October 2021; as bookrunner with respect to the issuance by Permira Advisors LLP, an affiliate of Permira, of bonds (aggregate principal amount of $850,000,000) in May 2022; and as financial advisor to Permira Advisers (HK), an affiliate of Permira, with respect to its sale of Tricor Holdings Limited in June 2022. During the two-year period ended June 24, 2022, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to Permira and/or its affiliates of approximately $133 million.

 

 

Additional Information and Where to Find It

 

This communication relates to the proposed transaction involving Zendesk, Inc. (“Zendesk”). In connection with the proposed transaction, Zendesk has filed with the U.S. Securities and Exchange Commission (the “SEC”) a definitive proxy statement on Schedule 14A (the “Proxy Statement”). The Proxy Statement was first mailed to Zendesk’s stockholders on or about August 8, 2022. This communication is not a substitute for the Proxy Statement or for any other document that Zendesk may file with the SEC and send to its stockholders in connection with the proposed transaction. The proposed transaction will be submitted to Zendesk’s stockholders for their consideration. Before making any voting decision, Zendesk’s stockholders are urged to read all relevant documents filed or to be filed with the SEC, including the Proxy Statement, as well as any amendments or supplements to those documents, when they become available because they will contain important information about the proposed transaction.

 

Zendesk’s stockholders will be able to obtain a free copy of the Proxy Statement, as well as other filings containing information about Zendesk, without charge, at the SEC’s website (www.sec.gov). Copies of the Proxy Statement and the filings with the SEC that will be incorporated by reference therein can also be obtained, without charge, by directing a request to Zendesk, Inc., 989 Market Street, San Francisco, CA 94103, Attention: Investor Relations, email: ir@zendesk.com, or from Zendesk’s website www.zendesk.com.

 

Participants in the Solicitation

 

Zendesk and certain of its directors, executive officers and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding Zendesk’s directors and executive officers is available in Zendesk’s proxy statement on Schedule 14A for the 2022 annual meeting of stockholders, which was filed with the SEC on July 11, 2022. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the Proxy Statement and other relevant materials to be filed with the SEC in connection with the proposed transaction when they become available. Free copies of the Proxy Statement and such other materials may be obtained as described in the preceding paragraph.

 Forward-Looking Statements

 

This communication includes information that could constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements include those set forth above relating to the proposed transaction as well as those that may be identified by words such as “will,” “intend,” “expect,” “anticipate,” “should,” “could” and similar expressions. These statements are subject to risks and uncertainties, and actual results and events could differ materially from what presently is expected, including regarding the proposed transaction. Factors leading thereto may include, without limitation, the risks related to the Ukraine conflict or the COVID-19 pandemic on the global economy and financial markets; the uncertainties relating to the impact of the Ukraine conflict or the COVID-19 pandemic on Zendesk’s business; economic or other conditions in the markets Zendesk is engaged in; impacts of actions and behaviors of customers, suppliers and competitors; technological developments, as well as legal and regulatory rules and processes affecting Zendesk’s business; the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the proposed transaction that could reduce anticipated benefits or cause the parties to abandon the proposed transaction; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement entered into pursuant to the proposed transaction; the possibility that Zendesk stockholders may not approve the proposed transaction; the risk that the parties to the merger agreement may not be able to satisfy the conditions to the proposed transaction in a timely manner or at all; risks related to disruption of management time from ongoing business operations due to the proposed transaction; the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of Zendesk’s common stock; the risk of any unexpected costs or expenses resulting from the proposed transaction; the risk of any litigation relating to the proposed transaction; the risk that the proposed transaction and its announcement could have an adverse effect on the ability of Zendesk to retain customers and retain and hire key personnel and maintain relationships with customers, suppliers, employees, stockholders and other business relationships and on its operating results and business generally; the risk the pending proposed transaction could distract management of Zendesk; and other specific risk factors that are outlined in Zendesk’s disclosure filings and materials, which you can find on www.zendesk.com, such as its 10-K, 10-Q and 8-K reports that have been filed with the SEC. Please consult these documents for a more complete understanding of these risks and uncertainties. This list of factors is not intended to be exhaustive. Such forward-looking statements only speak as of the date of these materials, and Zendesk assumes no obligation to update any written or oral forward-looking statement made by Zendesk or on its behalf as a result of new information, future events or other factors, except as required by law.

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

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