Avaya Networking Biz Saga Ends in Acquisition by Extreme Networks
One chapter of Avaya's long and troubled story may be coming to a close. Extreme Networks has confirmed that it will acquire Avaya's networking business for $100 million.
The deal has been on the radar since March, but Avaya held off in the hopes of getting a higher bid in the wake of filing for Chapter 11 in January. After getting no more bites, the company agreed to the rock-bottom sale to Extreme.
Avaya has struggled mightily in recent years under the weight of private equity debts it bought in 2007, just before the Great Recession sent interest rates plummeting. It hasn't posted an annual profit since.
We watched throughout 2016 as it tried one move after another to get out from under $6 billion in debt to no avail. Let's take a look back at the series of events that led to this week's announcement:
- In May of last year, rumors began to circulate that Avaya would soon be up for sale as President and CEO Kevin Kennedy confirmed the company was working with Goldman Sachs to "evaluate expressions of interest that have been received relative to specific assets, as well as explore other potential strategic opportunities."
- In June, facing a $616 million term loan payment, Avaya met face-to-face with a group of its creditors including Blackstone Group LP and Apollo Global Management LLC who were pushing for the company to halve its debt load.
- August saw Avaya's creditors meeting to devise a plan to push Avaya to restructure its balance sheet. The lenders, led by Frankline Resources Inc., wanted to reach an agreement among investors and present a focused plan when dealing with the company.
- Things were relatively quiet until November, when reports surfaced that Avaya was considering a sale of its call-center business as well as filing Chapter 11. Buyout firm Clayton, Dubilier & Rice (CDR) was rumored to be considering purchasing the business unit for $4 billion, but the deal fell through.
- That brings us to January, which saw Avaya pulling the trigger on Chapter 11, reversing its stance on selling its call-center business and affirming its intention to focus on providing unified communications.
- In keeping with that mission, the company began talks to sell its networking arm to Extreme Networks in March.
For its part, pure-play networking provider Extreme has been busy with a series of acquisitions designed to strengthen its position in the market, which is led by giants HPE and Cisco. Last October, it acquired Zebra Technology's wireless LAN business for $55 million, and in March, it bought Brocade Communications networking arm from Broadcom for $55 million.
M&A advisory martinwolf said this puts Extreme in a position to provide end-to-end capabilities.
"Seeking to complete its end-to-end reach in a single combined platform within the next year, the Avaya acquisition would bring deployment simplicity, micro-segmentation and fabric technology with embedded security, while the Brocade portfolio would bring high-end data center networking along with visibility and automation," it said in an email.