Avaya Said to be Considering $5 Billion Buyout

Rumors are swirling that a private equity firm wants to buy Avaya.

Avaya is considering a $5 billion leveraged buyout offer from a private-equity firm, says a Reuters report, citing people familiar with the matter. The company’s stock jumped nearly 33 percent on Monday in response to the news.

The firm making the offer could not be identified, according to the article. Avaya’s board of directors is said to be weighing the bid. Private-equity companies have shown interest in Avaya during the last few months.

“We do not comment on rumors or speculation,” Forrest Monroy, Avaya’s head of global corporate communications, told Channel Partners.

Raul Castanon-Martinez, 451 Research’s senior analyst of workforce collaboration, said the move makes sense if it “allows [Avaya] to continue moving forward at a fast (or even faster) pace as it has in the last year and a half” with president and CEO Jim Chirico.

451 Research’s Raul Castanon-Martinez

“Recent announcements from Avaya at its annual Engage event highlight how its product and go-to-market strategies have evolved to deliver UC and CC services in private, public or hybrid cloud configurations, using artificial intelligence (AI) as a differentiation,” he said. “OneCloud ReadyNow – a new delivery model for single-tenant cloud UC – and its intelligent assistant with Slack integration are both good examples of how its offerings have evolved with Jim Chirico at the helm.”

Although it’s still evolving, Avaya’s portfolio is “up to par” with leading industry players, making it an attractive target for a private equity firm buyout, Castanon-Martinez said.

Avaya exited chapter 11 bankruptcy protection in late 2017 and became a publicly traded company on the New York Stock Exchange (NYSE) at the beginning of last year.

For its first quarter of 2019, which ended Dec. 31, Avaya reported $738 million in revenue and profit totaled $9 million. It also said its earnings were negatively impacted by the extended government shutdown, but wouldn’t comment further.

Castanon-Martinez said it wasn’t surprising that the shutdown hurt Avaya.

“Only a handful of companies are targeting the opportunity to revamp UC in government, given the strict requirements and the complexity it entails, and Avaya is one of them (others are Collab9 and Cisco),” he said. “The UCaaS opportunity for government organizations requires a significant investment, given the complexity involved with compliance requirements, certification process and long sales cycles, and very few companies are able to do that. The impact of the government shutdown will likely linger on. It implies not only a delay in the entire process, which is already long and complicated. It might set some parts of the process back to square one, meaning more expenses for vendors like Avaya. It also means revenue will be delayed so we might see the effects reflected a few quarters down the road.”