Reportedly, the tech giant Meta, formerly known as Facebook, has opted to sell off the majority of its stake in the business software provider Kustomer. According to Yahoo! Finance, this move signals the end of Meta’s ambitious endeavor to introduce a high-end enterprise-grade customer service platform.
Under the terms of the agreement, Meta will retain its status as the largest shareholder of Kustomer but will no longer have a seat on its board. The company is relinquishing control of Kustomer back to its original partners, namely Battery Ventures, Redpoint Ventures, and Boldstart Ventures. In return, these previous backers will collectively inject $60 million in capital into the business-software startup, valuing it at approximately $250 million.
This strategic shift by Meta involves trading its ownership of the CRM system for a passive minority stake. Notably, Brad Birnbaum, the CEO, and Co-Founder of Kustomer, will continue to lead the spun-out business. This spin-out aligns with Meta’s broader “efficiency effort,” aimed at refocusing the company on its core business operations and streamlining its activities.
A Meta spokesperson explained, “In light of Meta’s efficiency efforts, we’ve made the decision to focus on our fastest-growing business messaging offerings, including the monetization opportunity for WhatsApp.”
Meta initially acquired Kustomer in a move to amplify the capabilities of its social media platform. The acquisition, valued at around $1 billion, was finalized in 2020 following a year-long regulatory review. It was heralded as a significant step in integrating Messenger and WhatsApp into customer service environments.
However, Meta’s integration with various competitors of Kustomer, such as Hubspot, raised doubts about the value proposition of the Meta-Kustomer deal. Furthermore, despite this high-profile acquisition, Kustomer’s revenue growth plateaued the previous year, with the company incurring losses of approximately $200 million.
Nevertheless, Meta’s integration allowed customers to seamlessly use WhatsApp for communication, search, and transactions with businesses directly on the platform. Despite the potential benefits of having a CRM system for storing customer experience data, Meta concluded that it didn’t necessarily need to be a first-party system. Collaborating with third-party systems could still enable Meta to facilitate business communications through Messenger and WhatsApp.
Considering these factors, Meta made the decision to divest Kustomer and return its focus to its core business. After this divestment, Kustomer will operate independently with a reduced workforce of around 90 employees compared to its size under Meta. Despite the changes, the CEO of Kustomer expressed optimism, stating, “It’s a significant milestone for Kustomer as we begin our next chapter as an independent company.”
Meta’s plan to spin off Kustomer was first reported in March 2023, coinciding with a broader restructuring effort at the company, including layoffs, project cancellations, and downsizing.
Equity divestment is a complex process in the M&A industry, and Meta’s move involves intricate coordination. Businesses seeking efficient divestment of their units may benefit from engaging a reputable M&A service provider such as Fission Consulting, which possesses expertise in managing transformational projects with minimal disruptions. Holding a minority stake in Kustomer will enable Meta to continue developing new products in collaboration with the CRM business and serving the customers it acquired during its ownership of Kustomer.