What does this sudden move mean for the company's many channel partners?

Edward Gately, Senior News Editor

April 24, 2018

5 Min Read
Business Handshake

**Editor’s Note: Read our list of 20 top UCaaS providers offering products and services via channel partners or here for a recap of the biggest channel-impacting merger and acquisition news from March.**

Abbott-Todd_Mitel.jpg

Mitel’s Todd Abbott

Out of the blue, Mitel is going private by agreeing to sell to an investor group led by affiliates of Searchlight Capital Partners. It’s a $2 billion, all-cash transaction that also covers the company’s debt.

Upon closing, Mitel will become a privately held company, which is expected to provide it with additional flexibility to accelerate its move-to-the-cloud strategy. Look for the deal to close during the second half of the year, subject to customary closing conditions, including receipt of shareholder, regulatory and court approvals.

Todd Abbott, Mitel’s executive vice president of global sales and service, tells Channel Partners that for his company’s partners, “it means first and foremost continued business as usual.” The purchase price represents a 24 percent premium above Mitel’s stock price.

“The acquisition by the investment group is (part) of the company’s strategy and the company’s leadership team executing that strategy,”  Abbott said. “We are a legacy, on-site PBX business, and that market is declining as more customers move to cloud, UCaaS. This is a disruptive transition, so to be able to manage that disruption of solutions and business models, as a private company it’s much easier. We can be freed of quarter-to-quarter performances the public requires and more strategic in leading that part of the business.”

Last month, Mitel unveiled its integrated global partner program, which launched this month. It includes the “strengths” of its former program and that of ShoreTel, which it acquired last fall.

“It really is about enabling us to execute the current strategy more aggressively and with more flexibility,” Abbott said. “We’ve driven a fair amount of change in our channel ecosystem with ShoreTel-Mitel, so the plan is to really give that change and new channel program time to take hold and partners to align to it.”

Conlon-Mike_Mitel.jpg

Mitel’s Mike Conlon

“We’re talking about cloud; we’re really talking about becoming the industry leader in the UCaaS space, and really building the momentum in this channel that we typically haven’t had over the past 12-18 months that we absolutely have today,” Mike Conlon, Mitel’s vice president of North America channel sales, told us in an interview at last week’s Channel Partners Conference and Expo — just days before news of the sale broke.

“We have great momentum in the agent channel right now around the UCaaS space,” he added. “We’re looking at potentially building a more sticky model for agents that are looking to become more sticky with their customers and give them a margin enhancement versus a traditional retail agency model where it’s based on commission. We’re hearing some pretty strong feelings that we’re moving in the right direction.”

Raul Castanon-Martinez, senior analyst of workforce collaboration at 451 Research, said the move doesn’t comes entirely as a surprise, “not because there were rumors regarding Mitel being up for sale, but because of the transformation the company has experienced in the last three years.”

“It’s no secret that Mitel has struggled with the shift to the cloud and emerging competitors, but the company has undergone a significant transformation to reinvent itself,” he said. “Perhaps its biggest challenge has been …

… the speed at which it can execute, and going private can be instrumental for this purpose. The company has a number of assets that place it in a good position to maintain a top spot in the communications and collaboration space, including an extensive market footprint and the CPaaS assets that came with the acquisition of ShoreTel.”

Castanon-Martinez-Raul_451-Research.jpg

451 Research’s Raul Castanon-Martinez

Making the numbers to keep investors happy on a quarterly basis while undergoing a major transformation with a long-term view are two things that tend to be mutually exclusive, Castanon-Martinez noted.

“Going private should take the pressure off and give Mitel more room to maneuver and swiftly execute on its long-term strategy,” he said.

Jon Arnold, principal analyst at J Arnold & Associates, said Mitel’s growth potential is limited in that it’s not going to catch the market leaders — Cisco, Microsoft and even Avaya — while it should be able to continue to fend off RingCentral, Vonage and 8×8. However, going private does provide more options for accessing capital, which could be used to make a big acquisition, he said.

“And you also have to consider Searchlight,” he said. “They may have their own plans for building up a footprint in this space, and their own ideas of how a company like Mitel might fit into their broader portfolio, and might want to fit into companies more focused on artificial intelligence (AI), for example, or some global markets, or tied to carriers.”

Mitel’s board of directors unanimously agreed the transaction is in the best interests of the company, and will recommend that shareholders approve the arrangement.

Searchlight, a private investment firm with investments in North America and Europe, seeks out partnerships for its funds with leading corporations and businesses in which their capital and strategic support can enhance value.

Read more about:

Agents

About the Author(s)

Edward Gately

Senior News Editor, Channel Futures

As news editor, Edward Gately covers cybersecurity, new channel programs and program changes, M&A and other IT channel trends. Prior to Informa, he spent 26 years as a newspaper journalist in Texas, Louisiana and Arizona.

Free Newsletters for the Channel
Register for Your Free Newsletter Now

You May Also Like