One of the most prolific consolidators in the UC and cloud communications sector has struck again. Canadian-based Mitel has announced an agreement to acquire slightly larger competitor Polycom.
The purchase won't come as a big surprise to the markets. Rumors had been circling that the two companies were talking, and Polycom had been feeling pressure from activist investors to do a deal. Mitel has been quite acquisitive, racking up deals for Mavenir and Aastra and making an unsuccessful bid for ShoreTel.
Polycom specializes in conferencing and collaboration, with a growing emphasis on video. Combining that with Mitel's hosted voice and UC will expand the range of services Mitel will bring to the table for the enterprise marketplace. Mitel has been growing both organically and inorganically, while Polycom has lately been sliding. By unifying videoconferencing and collaboration with cloud communications and UC, Mitel hopes to broaden its addressable market considerably.
Mitel will be paying $1.96B for Polycom, made up of $3.12 per share in cash plus 1.31 shares ($13.68) of its stock. After the transaction is complete, Mitel's run-rate revenue will be in the neighborhood of $2.5B with pro forma EBITDA around $350M. They'll be looking to wring out some $160M in operating synergies.
With the deal, Mitel's headcount will surge up to 7,700. We can expect that to shrink a bit with synergies of course, which won't be fun for those affected. But while those synergies are certainly an important part of the deal, they aren't really the driving force. The key will be to meld the two sides of the business together such that the whole is greater than the sum of the two parts.
The transaction is expected to close sometime during the third quarter of 2016 pending stockholder approval. Both boards have approved the transaction, as have key investors for both companies.