Mitel had a deal to acquire Polycom for $1.96 billion, but Siris Capital made a better offer.

Mitch Wagner, Executive Editor, Light Reading

July 8, 2016

4 Min Read
Siris Snatches Up Polycom, Leaving Mitel Bereft

Private investor Siris Capital plans to buy Polycom for $2 billion, according to statements Friday, edging out a Mitel takeover that had looked like a done deal.

Siris's all-cash bid is a "company superior proposal" for Polycom Inc. (Nasdaq: PLCM) under the terms of Polycom's previous merger agreement with Mitel, according to a statement from Siris. For its part, Mitel Networks Corp. declined to increase its $1.96 billion bid, and stepped aside. (See Mitel Faces Competition in $1.96B Polycom Bid.)

In Siris's statement, executive partner Dan Moloney praised Polycom's "25-year history providing audio and video collaboration needs of the most demanding enterprises."

He added that Polycom "fits well with Siris' investment focus on mission-critical telecommunications businesses... 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 cash offer from Siris will be financed by a combination of equity, provided by Siris, and debt financing by Macquarie Capital.

Mitel backed out of the acquisition in a statement Friday. "We feel it would not be in the best interest of Mitel shareholders to adjust the existing agreement," Rich McBee, President and CEO of Mitel, said. "While I am disappointed that this particular transaction will not move forward, I am confident in Mitel's future as an industry leader and as a market consolidator. I wish our colleagues at Polycom, with whom we have worked closely for the past several months, ongoing success in the future."

The breakup leaves Mitel's future direction up on the air -- though of course Mitel denies it. A company spokesperson said in an email to Light Reading Friday: "Today's development has no impact on Mitel's corporate strategy, which is designed to leverage our large and profitable base business while driving high growth in our mobile and cloud divisions. Our view that the market is consolidating and that Mitel intends to lead that consolidation also remains unchanged."

And yet Mitel outlined a broad range of ways that it and Polycom would work together strategically, in presentations and interviews at the Mitel's annual user group conference in April, soon after Mitel and Polycom announced their intended merger. (See What's Driving Mitel's $2B Polycom Acquisition? and Mitel to Buy Polycom for $1.96B.)

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Polycom's revenues are a little bigger than Mitel's -- $1.27 billion for Polycom compared with $1.16 billion for Mitel in 2015. Mitel's strength is in cloud-based, on-premises PBX, and hybrid voice and unified communications systems for enterprises and communications service providers. Mitel CMO Wes Durrow told Light Reading in April that his company's strength has been voice, while Polycom specializes in videoconferencing. Mitel's strength is in the midmarket, while Polycom's is in the Fortune 500. And Mitel planned to bring cloud support to Polycom videoconferencing, currently based on customer premises equipment without a cloud component.

Unified communications companies are seeing increased competitive pressure from technologies such as Slack and Microsoft's Skype, which provide similar capabilities without hardware overhead.

As for Polycom's future under Siris: Private equity firms often buy companies as fixer-uppers, and then sell them off again, which might become Polycom's fate.

In addition to Polycom, Siris is a lead investor in collaboration software and service provider PGi; PulseSecure, which provides access and mobility security to service providers and enterprises; Airvana, which provides network infrastructure for wireless providers; Tekelec, which provides signaling and session controllers for service providers; and more. It acquired Xura, a digital communications services provider, in May for $643 million through affiliates. And one of Siris's executive partners, Mary McDowell, is formerly Nokia's head of feature phones.

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— Mitch Wagner, Follow me on TwitterVisit my LinkedIn profile, Editor, Light Reading Enterprise Cloud.

About the Author(s)

Mitch Wagner

Executive Editor, Light Reading

San Diego-based Mitch Wagner is many things. As well as being "our guy" on the West Coast (of the US, not Scotland, or anywhere else with indifferent meteorological conditions), he's a husband (to his wife), dissatisfied Democrat, American (so he could be President some day), nonobservant Jew, and science fiction fan. Not necessarily in that order.

He's also one half of a special duo, along with Minnie, who is the co-habitor of the West Coast Bureau and Light Reading's primary chewer of sticks, though she is not the only one on the team who regularly munches on bark.

Wagner, whose previous positions include Editor-in-Chief at Internet Evolution and Executive Editor at InformationWeek, will be responsible for tracking and reporting on developments in Silicon Valley and other US West Coast hotspots of communications technology innovation.

Beats: Software-defined networking (SDN), network functions virtualization (NFV), IP networking, and colored foods (such as 'green rice').

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