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Mitel/Avaya Merger Looks Imminent
It is likely that Mitel will acquire Avaya, following news that Avaya CEO Jim Chirico stated he would be seeking “strategic alternatives” during the company’s August 13 third quarter earnings call.
A week following Chirico’s statement, Mitel was announced as an interested buyer. Indeed, Mitel’s interest stems back four months, after The Wall Street Journal reported Mitel was discussing a merger with Avaya.
Mitel’s acquisition of Avaya looks set to be in the margin of $20-$22 per share, a total valuation of $2 billion.
Avaya still may choose to go its own way but the viability of doing so is questionable. Staying on public stock will mean Chirico will have to convince shareholders to not use revenue as a metric for success as it revamps its approach away from PBX. Making these changes under the glare of Wall Street might prove to be too much.
Moreover, should Avaya go private, servicing its debt might mean selling off portions of its organization. However, splitting an organization is challenging, and removing what makes Avaya so attractive to its customers would likely set the organization’s final demise.
Source: SoftwareReviews Avaya Unified Communications Scorecard. Accessed September 9, 2019
Should Mitel acquire Avaya, this move will need to be made with some caution. Mitel is still restructuring its organization following its acquisition of ShoreTel, alongside continued work needed on its cloud strategy. An Avaya acquisition may see large-scale layoffs and integration problems.
However, the implications of a successful merger would have widespread ramifications across the unified communications market. Avaya has huge international market reach and would surely put Mitel within an arm’s length of the top two vendors in this space (Microsoft and Cisco).
For instance, combining Avaya’s and Mitel’s contact centers would see the merged companies become significant competition against big players, including RingCentral and 8x8. Of course, this prospect could also mean that Mitel will face late offers for Avaya from either vendor.
Furthermore, whereas Avaya’s focus has been on private/hybrid cloud services, Mitel has strengths in public cloud services. A Mitel/Avaya merger would be complementary in this regard.
As such, should an acquisition be made, all eyes will be on the strength of Mitel’s rollup strategy to make the potential benefits of this merger a reality.
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