August 21, 2019
That’s according to Jon Arnold, principal analyst at J Arnold & Associates, who, along with Raul Castanon, 451 Research’s senior analyst of workforce collaboration, weighed in on the latest reports regarding who could potentially acquire Avaya. Speculation has reached a fever pitch this week.
Bloomberg reports that Avaya is considering a bid by Mitel that would create a telecommunications vendor worth more than $5 billion, including debt. In addition, Reuters is reporting that Avaya is considering an all-cash offer from private equity firm Clayton Dubilier & Rice as an alternative.
Avaya sent us the following statement: “On our earnings call last week, we provided an update with respect to our strategic review process and noted that we expect to bring the process to conclusion within 30 days. There has been media speculation regarding Avaya’s next steps, but it is just that – speculation – and as a matter of policy, we do not comment on rumors or speculation.”
Mitel said it doesn’t comment on rumors or speculation.
A combination of Mitel and Avaya would “definitely shake things up,” Arnold said.
Arnold & Associates’ Jon Arnold
“This is really all about Mitel; they’ve always wanted to be at that level. That’s why they’ve had all these acquisitions to get bigger and bigger,” he said. “Mitel has done a good job of absorbing companies its own size, but going after something bigger than them would be more ambitious, and it would be a challenge to make all those pieces fit and those cultures fit. And the channel is a big one, to rationalize all of that.”
Keep up with the latest channel-impacting mergers and acquisitions in our M&A roundup.
A big question is whether Avaya’s product line would supplant what Mitel has or if Mitel would find a way to fit them together, Arnold said.
“Also, Avaya is not as far along with cloud as everyone else, so Mitel would probably have a bit more work there to bring that into more of a cloud-based scenario,” he said. “So it’s a lot for Mitel to take on, but if ambition and wallet outweighs that, it could find a way to make it work because it would instantly make them what they’ve always wanted to be.”
Also yet to be seen is whether all of Avaya would be sold to one party or the company would be broken into pieces, Arnold said. In addition, there could be other potential buyers interested in acquiring the company, he said.
451 Research’s Raul Castanon
“Would this be a way for Amazon to leapfrog themselves into the game?” he said. “It’s probably out of character, but it’s certainly in their means if they wanted to be in the game.”
Castanon said combining with Mitel would be a smarter move for Avaya than being acquired by a private equity firm.
“A merger between Mitel and Avaya would result in a company with a market share that would rival key industry players Cisco and Microsoft,” he said. “Furthermore, both companies come to the table with valuable assets. All of this would place the combined company in a strong position and would have a significant impact for the industry.”
However, the back and forth that Avaya has been engaged with might end up limiting their options, Castanon said.
“While it’s understandable that the company is looking to maximize the value for their investors, there is also a window of opportunity in terms of the benefits they can reap from a merger with Mitel; further delays in their decision might end up in a missed opportunity for both,” he said.
Jay McBain, principal analyst for Forrester Research, said there are definitely synergies between Mitel and Avaya.
“Mitel and Avaya both have well-established dealer and agent channels, experience in managing national and international accounts, and proven track records with most industries and customer segments,” he said. “Partners have been commenting about Mitel-Avaya being a powerful alternative to Microsoft-Cisco and a welcome development in the telco industry.”
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