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 Channel Futures

Mergers and Acquisitions


Avaya Sale Rumors Spark Questions About Company Future

  • Written by Michael Cusanelli
  • May 23, 2016

Reuters first reported talks of a potential sale of Avaya last week, following alleged talks between the company’s current owners, Silver Lake Partners and TPG Capital LP. Although Reuter’s sources refused to be identified by name, they said the two companies valued Avaya between $6 billion and $10 billion.

Avaya could soon be up for sale, if rumors regarding the fate of the telecom provider turn out to be true.

Reuters first reported talks of a potential sale of Avaya last week, following alleged talks between the company’s current owners, Silver Lake Partners and TPG Capital LP. Although Reuter’s sources refused to be identified by name, they said the two companies valued Avaya between $6 billion and $10 billion.

Avaya was also rumored to be working with Goldman Sachs regarding possible sale opportunities. Avaya President and CEO Kevin Kennedy did confirm that Goldman Sachs is “helping Avaya evaluate expressions of interest that have been received relative to specific assets, as well as explore other potential strategic opportunities.”

However, company officials have refused to comment specifically on the nature of said discussions.

Whether or not a potential sale is currently in the works, such a plan could prove beneficial for Avaya following the company’s recent financial troubles. Avaya is currently in debt to the tune of $6 billion as a result of its shifting focus from hardware to software sales, and Q2 2016 figures showed a decrease in revenue of $54 million from Q1. With year over year figures also showing a decrease of $91 million, Avaya definitely needs to do something different unless it wishes slide even further into debt.

Tags: MSPs Mergers and Acquisitions

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17 comments

  1. Avatar Anonymous May 23, 2016 @ 9:58 pm
    Reply

    Switching from hardware to
    Switching from hardware to software has nothing to do with the debt issue. When it was bought by the two brilliant PE firms, there was over $5 billion in debt used to finance the transaction. Then, the purchase of Nortel’s failed business heaped another billion on top of that. Revenues, morale, margins and market share have decreased every year since 2007. The whole “transition to software” is an obvious head fake to keep focus off the poor decisions, useless leadership and utterly failed business model.

    • Avatar Anonymous May 25, 2016 @ 1:04 am
      Reply

      Great point on the debt and
      Great point on the debt and transition to hardware. That’s the vulture behavior of some PE firms. Shame on the previous Avaya management who basically sold out the company and pocketed millions. Avaya has been riding downhill with nothing to stop it, and now the billion dollar bills are due. Hopefully they can salvage some of it, some good people still left there.

    • Avatar Anonymous May 25, 2016 @ 3:41 am
      Reply

      Margins have not been
      Margins have not been decreasing every year since 2007. Gross margins have increased, and net loss has been reducing since 2010, to the point where at 2015 they were something like 145 million from break even.

      • Avatar Anonymous May 26, 2016 @ 12:31 pm
        Reply

        net loss is being reduced by
        net loss is being reduced by layoffs mostly. Debt service is outrageously high, engineering processes completely out of date which turns the company highly inefficient…whoever buys this sinking ship will have to make huge efforts to turns this company around.. anyway I will be out the door in a couple months, good luck!

  2. Avatar Anonymous May 24, 2016 @ 3:06 pm
    Reply

    Not to mention “forecasters”
    Not to mention “forecasters” have been wrong for years now and still keep their jobs. To justify their mistakes, the workforce continues to be cut. How Kennedy keeps his job is one of the big mysteries in the telecom industry.

  3. Avatar Anonymous May 24, 2016 @ 6:15 pm
    Reply

    Agree. Useless leadership and
    Agree. Useless leadership and selfish managers are responsible for Avaya’s downfall.

    • Avatar Anonymous May 24, 2016 @ 11:21 pm
      Reply

      You hit the nail on the head.
      You hit the nail on the head.

    • Avatar nostradamus May 25, 2016 @ 12:35 am
      Reply

      one option is to finance and
      one option is to finance and spin out Zang, as the surviving Noah’s Ark, put the best on there and let the rest go chapter 11 in the debt floods.

  4. Avatar Anonymous May 26, 2016 @ 3:57 am
    Reply

    Useless Managers and work is
    Useless Managers and work is like service company. They can’t take decision fast.

  5. Avatar Anonymous May 26, 2016 @ 12:53 pm
    Reply

    From AVAYA’s most recent
    From AVAYA’s most recent Balance Sheet:

    Current Assets = $1,331 < Current Liabilities $1,671

    Total Assets = $6,686 but of this $4,074 is Goodwill which has never been significantly impaired even though annual Sales have declined from $5.3B down to $4B (and continue to decline) and they’ve lost more than $5B in Net Income since they were privatized.

    Long Term Debt = $5,967

    Pension Obligation = $1,615

    AVAYA has no (actually less than zero) Stockholder’s Equity. The have a Stockholder’s Deficiency of $3,502.

    I would love to know what a Wall Street Merger’s & Acquisition Analyst would have to say about all this….

    Food for thought on AVAYA's current valuation.

    Thanks,

    Dan

  6. Avatar Anonymous May 26, 2016 @ 6:44 pm
    Reply

    What will be the future of
    What will be the future of Avaya employee ?
    If the company sell ?

  7. Avatar Anonymous May 27, 2016 @ 1:51 am
    Reply

    Typical Avaya- large customer
    Typical Avaya- large customer needs a license tomorrow – Avaya process tells them sorry – it will take a week for us to process the order. They can’t get out of their own way. Great core products with terrible marketing, management, and poor developer relations.

  8. Avatar Patrick Fahy May 27, 2016 @ 8:10 am
    Reply

    As a former Nortel and Avaya
    As a former Nortel and Avaya sales specialist, if Avaya concentrated on one product set which is the same for 50 users as 5,000 then it would be easier to sell. Add to that a cloud offering which is simple and well orchestrated and they might start to regain market share, regardless of who owns them or buys them.
    Just my opinion,
    Kind regards
    Patrick

  9. Avatar Anonymous May 27, 2016 @ 10:27 am
    Reply

    Agree – foolish management
    Agree – foolish management kills a very successful Telco.

  10. Avatar Anonymous June 8, 2016 @ 11:35 pm
    Reply

    I have to disagree with the
    I have to disagree with the first poster who believes SLP and TPG to be “brilliant;” all they did was buy a distressed company with no debt and a legacy of mismanagement and lard it up with debt and questionable purchases with little hope of synergy like Skype and its traditional rival Nortel and hope they could salvage something of the whole wretched mess. Sorry for the remaining customers still loyal to the brand and the retirees who will surely get the shaft when the dust settles with the inevitable fire sale.

  11. Avatar Anonymous June 15, 2016 @ 4:16 pm
    Reply

    Some Chinese company should
    Some Chinese company should invest in it.

  12. Avatar Anonymous June 22, 2016 @ 2:48 am
    Reply

    Ahhh yes the Golden Day of
    Ahhh yes the Golden Day of Avaya are long gone, just chop staff seems to be the business plan the Mr Kennedy can come up with, Customer Sat thrown out with lot of good engineers

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