Partners Stunned As Polycom Terminates Mitel Merger, Opts To Be Acquired By Private Equity Firm
The merger between global unified communications vendors Polycom and Mitel was terminated Friday, leaving Polycom channel partners stunned.
Instead of Mitel buying Polycom, a move that was disclosed earlier this year, private equity firm Siris Capital Group will now acquire Polycom for $2 billion with plans to take the San Jose, Calif.-based company private, according to releases Friday from Polycom and Siris Capital Group.
"This is shocking to hear," said an executive from a solution provider that partners with Polycom and Cisco Systems, who declined to be identified. "The last I heard, they were working to get [Polycom] partners up to speed with Mitel and how the merger would be playing out. … I can't believe it fell apart like this in the eleventh hour. We didn't hear a thing. There's a lot of uncertainty now on the table."
Partners had said that Mitel’s nearly $2 billion bid to acquire Polycom would benefit the channel as the combined company would put more pressure on larger competitors, including Cisco. The companies were considering cross-selling to each other's customers and integrating technologies that would expand partners’ total addressable market, said Nick Tidd, Polycom’s vice president of the Global Partner Organization, in an interview with CRN in April.
"I was bullish on the Mitel [deal]," said Chris Bottger, chief technology officer at IVCi, a Hauppauge, N.Y.-based solution provider and Polycom partner. "The one thing that Polycom was lacking is the call control for voice. They have no call control platform for voice. That was always the big thing -- they couldn't do a total solution so it forced us partners to pick other [vendors] there whether it’s Microsoft, Avaya or BroadSoft. … For channel partners, this now brings uncertainty."
Polycom and Mitel did not immediately respond to a request for comment by press time.
Siris Capital Group submitted an offer to acquire Polycom for $12.50 per share in a $2 billion all-cash transaction, according to a Siris Capital Group release, pending Polycom's termination of its existing merger agreement with Mitel.
Polycom's board of directors received the offer from Siris Capital Group Thursday to acquire all outstanding shares of Polycom stock, while Mitel waived its right to renegotiate its previous agreement with Polycom, according to a Polycom release.
Polycom’s board of directors said Friday that it had approved the termination of the company's agreement with Mitel. When the Polycom-Mitel merger was terminated, in accordance with its terms, Polycom was permitted to accept Siris Capital Group’s offer and enter into the binding definitive agreement contained in the offer, according to a release from Siris Capital Group. Polycom will have to pay a termination fee of $60 million to Mitel.
"We are very excited for the opportunity to partner with Polycom and its leadership team, as the company fits well with Siris’ investment focus on mission-critical telecommunications businesses,’ said Dan Moloney, Siris Capital Group executive partner, in the release. ’The industry is transitioning to a hybrid on-premise and cloud-based unified communications environment. We believe that as an independent private company, Polycom would be best positioned to continue its heritage as a best-in-class communications solutions provider to more than 400,000 companies and institutions, channel partners, and the evolving unified communications ecosystem."
The private equity firm's portfolio includes a slew of technology providers including PGi, a collaboration software and services specialist; access and mobile security solutions vendor PulseSecure; and networking software providers Airvana and Tekelec, to name a few.
"PGi and Tekelec are the ones that could have a potential play, but I don't know," said Bottger. "And I don't know if Siris has a history of cross-merging the technologies or having them run completely independently."
Siris Capital Group did not immediately respond to comment by press time.
"With Mitel, there was a 'this makes sense' feel, but not knowing how Siris does things, there's a lot of uncertainty right now," said Bottger.
Mitel-Polycom merger talks started in October 2015 when Elliott Management – which owns a stake in both Polycom and Mitel – suggested that a merger would benefit the two companies.
Polycom stock jumped 13 percent Friday morning to $12.29 per share, while Mitel shares rose 18 percent to $7.11.