Mitel Reportedly Courting Avaya, Offering $2 Billion Merger

Mitel is proposing a UCaaS team-up of epic proportions.

Mitel has offered up to about $2.4 billion to merge with Avaya Holdings, the Wall Street Journal reported. That would be $20 or $22 per Avaya share, according to people familiar with the matter. The Nasdaq listed Avaya’s stock price at $19.26 as of Friday afternoon.

Avaya emerged from chapter 11 bankruptcy and went public a year-and-a-half ago, vowing to develop a reputation in the cloud and drive sales with its master agent program. Reuters reported recently that a private-equity firm had offered Avaya a $5 billion buyout.

Mitel in 2016 tried to buy Polycom – another UCaaS rival – but failed when Polycom accepted Sirius Capital Group’s $2 billion offer instead. Mitel’s offer Polycom was $1.96 billion, slightly lower than its current reported Avaya bid.

Mitel went on to buy assets from Toshiba’s UC unit and buy ShoreTel for $530 million the next year. The company then went private last year when Searchlight Capital Partners bought it.

dBrn’s Michael Finneran

Michel Finneran, principal of dBrn Associates, noted that Avaya brings $3 billion in debt to the table, but the companies complement each other in terms of customer base and technology portfolio.

“At face value the combination appears reasonable given Avaya’s presence among large businesses versus Mitel’s SMB focus,” Finneran told Channel Partners. “Avaya is a major presence in the contact center business and boasts a significant installed base; however, Mitel has been more aggressive in making the shift to the cloud.”

Finneran said industry observers might view such a merger as “a sign of weakness.”

“For many users, desk phones have become an anachronism with the shift to mobile and business applications like Salesforce that incorporate many of the same communication capabilities. More importantly, the real developments in the space, particularly the move to team collaboration, is being driven by Microsoft, Cisco and out-of-the-blue suppliers like Slack and Zoom,” he said.

Analyst Dave Michels wrote on TalkingPointz that he wasn’t surprised by the report. He said that both companies are rushing to make a move to appease shareholders and that Avaya’s large customer base is very attractive to prospective buyers. Some suitors think they can accelerate Avaya’s transformation faster than Avaya can, according to Michels.

“Avaya is transforming itself in many ways, but lagging in its public cloud offer. [Private equity] types that think they can transform Avaya faster than Avaya will itself see dollar signs here. Mitel’s UCaaS offer is the key,” Michels said.

The company’s channel executives told Channel Partners last year that Mitel was building momentum with partners as it strove to become the UCaaS leader.

“It really is about enabling us to execute the current strategy more aggressively and with more flexibility,” said Todd Abbott, executive vice president of global sales and service. “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.”