Joined: 25 Apr 2006
|Posted: Mon Sep 14, 2009 11:11 am Post subject: Avaya/Nortel Marriage Called Off
|Avaya/Nortel Marriage Called Off
June 5, 2007
Avaya announced an $8.2-billion acquisition by private equity firms TPG Capital and Silver Lake Partners. The deal allows Avaya to solicit competing bids over the next two months, but analysts don’t expect Silver Lake to be outbid since it has already outbid its rivals.
Analysts agreed Nortel was right to walk away since the potential merger would likely have been messy and plagued with integration issues. Although the merged companies would have had 30% of the market (nearly twice that of its closest rivals, Cisco and Siemens), it would have posed significant challenges.
Avaya’s many enterprise customers would require ongoing support without service disruptions, likely forcing Nortel to maintain redundant products for a long time. And while Avaya sells most of its gear directly to its customers, Nortel relies much more on resellers, making it harder for the combined company to unify and rationalize its sales channels. Avaya wouldn’t do much for Nortel’s revenue growth, either, UBS said, anticipating nearly 3% growth from Nortel next year and a little more than 4% growth from Avaya.
Nortel may consider acquiring another IP telephony vendor, such as Mitel, which is a far better fit.