RingCentral the 'Big Winner' in New Deal as Avaya Ends Acquisition Speculation

The suspense is over. Avaya is not being acquired, but instead is entering a strategic partnership with RingCentral in which it will introduce a new unified communications as a service (UCaaS) solution.

Under the agreement, RingCentral will contribute $500 million to the deal and will be Avaya’s exclusive provider of UCaaS solutions. RingCentral will pay $125 million in 3% redeemable preferred equity, convertible at $16 a share, and a $375 million advance for expected costs and licensing rights.

The transaction is expected to close this quarter, subject to customary closing conditions and regulatory approvals.

Avaya Cloud Office by RingCentral expands Avaya’s portfolio to offer a full suite of unified communications, contact center, UCaaS and CCaaS solutions to a global customer base, including more than 120,000 customers, more than 100 million UC lines and 5 million CC users in more than 180 countries.

Forrest Monroy, Avaya’s head of global corporate communications, tells Channel Partners this is a “unique partnership for Avaya, and we think, for the entire industry.”

Avaya’s Forrest Monroy

“We are very excited to be partnering with RingCentral, and believe it will greatly benefit all stakeholders, bringing together two global leaders in communications to deliver a differentiated Avaya UCaaS offer,” he said. “Avaya Cloud Office comes in direct response to what customers and partners have told us they need — a robust and flexible public cloud solution that allows them to leverage the features and devices they already have and love. The offer comes with special benefits for partners as part of the existing partner Avaya Edge program, and will provide significant economic benefit for new customers and migration of existing UC customers. Adding Avaya Cloud Office to our portfolio provides our customers and partners with access to the full suite of public, private and hybrid cloud solutions, and Avaya customers seeking to acquire Avaya Cloud Office will be presented with various migration options.”

Praful Shah, RingCentral‘s chief strategy officer, tells Channel Partners this is a “very unique partnership that is a win-win” for both RingCentral and Avaya, but “most importantly a win for customers.”

“We are jointly developing automated technologies for seamless customer transition to our leading UCaaS platform,” he said. “This will enable partners to offer their customers a much easier path to the cloud. Avaya enterprise customers now will have access to a modern cloud communications platform. Secondly, we are able to leverage Avaya’s extensive global go-to-market ecosystem, which includes over 4,700 channel partners and their reach across over 180 countries. And lastly, this will provide RingCentral with a new driver for long-term growth.”

Michael Finneran, a principal at dBrn Associates, said there’s been a lot of talk about a Mitel acquisition of Avaya or a move back to private equity financing, but “with its strong brand recognition and blue chip installed base, Avaya is right to stay independent.”

“The deal with RingCentral allows them to remain independent, address some of its financing challenges through the RingCentral investment and link up with one of the leaders in the UCaaS space to accelerate its much needed shift to the cloud,” he said. “As in all of these moves, success will depend on the execution. Consolidation has been the key theme in the business telephony/UC/team collaboration and contact center businesses, and the Avaya-RingCentral deal seems to draw a new angle to the same goal without a full-blown combination.”

Raul Castanon, 451 Research’s senior analyst of workforce collaboration, said the agreement is a win-win for both, but RingCentral is the big winner because …

… it will gain direct access to Avaya’s “enormous client base, many of which are due to move to the cloud in the near to medium term.”

451 Research’s Raul Castanon

“They also get access to Avaya’s sales channel, significantly expanding their reach into global markets,” he said. “It’s a good option to Avaya because one of their most valuable assets is their client base and they found a way to derive value from them in a creative way that benefits their customs as well. It puts RingCentral in a good position to accelerate their growth and benefit from the shift to the cloud. There’s still work to be done, but if RingCentral plays its cards it stands to gain significant market share.”

The agreement mirrors other deals such as the agreement between Atlassian and Slack when Atlassian discontinued its messaging apps HipChat and Stride, Castanon said.

“I think we can expect further consolidation, but probably less deals driven by market share and more along the lines of technology as in the recent acquisition of Voicea by Cisco, or New Voice Media by Vonage,” he said.

Drew Lydecker, Avant Communications president, said the partnership is further evidence that UCaaS is one of the “most disruptive” technologies on the market.

“As a top-tier channel partner of RingCentral, Avant is excited to see this partnership proceed with Avaya, which will provide tremendous value to end users as well as the channel community,” he said.