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Some partners ahead of the deal said Avaya had a few weaknesses that an outside investment could help shore up.
"From the Avaya side, the biggest Achilles heel is its lack of a data infrastructure play. Their [strategy has been] to partner with best-of-breed players, but long-term I don't see that working when Cisco is out there bidding on everything but the kitchen sink," said Jeff Hiebert, CEO of ROI Networks, an Avaya partner in San Juan Capistrano, Calif. "You've got to have the building blocks and money behind you. Avaya alone doesn't have enough capital."
Hiebert also questioned whether Avaya could keep up with the sizable investments its peers are making in technology research and development.
One suitor that solution providers said was noticeably absent from the Avaya acquisition rumors was Microsoft, which is making its own play for a chunk of the IP communications space via upcoming product launches and a partnership with Nortel. That left some partners to wonder if Microsoft plans to step in later and snap up the Avaya assets after it goes private.
The door has been seemingly left open for Microsoft or another potential buyer to step in and scuttle the deal with Silver Lake/TPG before it closes, since the merger agreement provides for Avaya to solicit proposals from third parties through July 24. Avaya would be assessed an $80 million fee for terminating the merger agreement in favor of a better offer or $250 million if the deal falls through for other reasons, according to filings with the Securities and Exchange Commission.
Under the terms of the agreement, Avaya shareholders will receive $17.50 in cash for each share of Avaya common stock.
The move represents the latest large-scale private equity investment in the technology sector. CDW last week unveiled plans to be acquired by Madison Dearborn Partners for $7.3 billion.
The Avaya deal is also the latest sign of upheaval in the VoIP market. In addition to Microsoft's entrance into the space, Mitel Networks is in the process of acquiring Inter-Tel in a $732 million deal unveiled in April, and ShoreTel is planning to go public later this year.
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