Avaya To Go Private In $8.2B Deal; Partners Relieved

The cash deal, announced late Monday night, was foreshadowed by reports that Avaya was entertaining several interested suitors, including the two private equity firms as well as networking competitors Nortel Networks and Cisco Systems. The sale is expected to close this fall.

In an e-mail letter to Avaya employees that was viewed by CRN, Avaya President and CEO Louis D'Ambrosio said the deal will provide "compelling returns" to Avaya shareholders and "clear value" to employees and customers.

"Going private creates an environment for Avaya and its employees to accelerate the execution of our strategy," D'Ambrosio said in the letter.

He also reassured employees that the company's top priorities remain intact.

"We are playing to win. While this is a big step, most things will not change for our company. We are more confident than ever that our three priorities -- strategy, execution and culture -- are right on target," he said.

Financial analysts viewed Avaya as an attractive takeover target because of its strong market share in the hot VoIP market and its small size relative to other players in the space, such as Cisco.

For fiscal 2006, Basking Ridge, N.J.-based Avaya reported earnings of $201 million on revenue of $5.15 billion. Earlier in the week, the company said it has shipped more than 100,000 of its SMB-focused IP Office VoIP systems, serving an estimated 3.6 million users.

Several Avaya solution providers expressed a sigh of relief that private equity firms, not rivals Cisco or Nortel, have emerged as Avaya's buyer.

"This is the best of all worlds for them to be bought by [private equity firms]. If they had been purchased by existing vendors in the IP telephony space like Nortel or Cisco, there would be too much overlap and a lot of the Avaya pieces and parts would most likely disappear," said Chris Labatt-Simon, president and CEO of D&D Consulting, an Avaya partner in Albany, N.Y. "All of the investment we've made in Avaya would have gone away, and that's a big thing. We've invested a lot of money in the partnership."

Still, Labatt-Simon is taking a wait-and-see approach on what the deal will mean in the long term for Avaya and its channel. "I have no idea if it's a good thing or a bad thing. But immediately, it's business as-is," he said.

Neal Stanton, president and CEO of New York-based Avaya partner Consultedge, said he's optimistic that the private equity firms will cultivate growth for Avaya's business.

"I hope they see that they have a strong company with a good product set, streamline it, but take advantage of what's there and help grow it," Stanton said. "Silver Lake has a phenomenal reputation for buying, investing, building and creating value," he added.

Silver Lake Co-Founder and Managing Director David Roux said in a statement that his company's interests are aligned with the long-term interests of Avaya customers and employees.

"We have full confidence in Avaya's excellent management to build on the company's remarkable technology and history, which spans more than a century, to deploy advanced IP communications solutions as a source of competitive advantage for customers," Roux said.

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