A busy stretch of major deals continued when Mitel announced it has acquired Polycom for about $1.96 billion, a move that creates a $2.5 billion behemoth focused on creating a one-stop solution in the communications and collaboration space, according to the announcement.
The combined company will have a global workforce of about 7,700 employees.
“The communications and collaboration industry is undergoing a period of intense change that is rapidly redrawing the competitive landscape and breaking down barriers between previously discrete markets and technology domains,” according to the joint press release announcing the deal.
“Through a series of strategic acquisitions, Mitel has successfully capitalized on changing market dynamics and transformed the company to help customers operate more efficiently and cost effectively. The combination of Mitel and Polycom will create a new industry leader leveraging Mitel’s recognized leadership as a pioneer in global communications with Polycom’s well-known premium brand and industry-leading portfolio in the conference and video collaboration market.”
Discussions between Mitel and Polycom started about 10 months ago, says Polycom chief marketing officer Jim Kruger, noting the talks “got more serious as time went on” and culminated in the latest deal that has the industry buzzing.
The move was “driven by Mitel’s strategy and vision of bringing multiple companies together,” says Kruger. “They felt like they had a gap in the collaborations area.”
For Polycom, the deal represents “an opportunity to bring our products into the small and medium-size market,” says Kruger, noting the company has primarily focused on Fortune 500 corporations in the past but recently launched several “plug-and-play” offerings with relatively low price points.
Mitel’s acquisition also gives Polycom the opportunity to leverage Mitel’s cloud voice offering by incorporating video into it, says Kruger. The same goes for Mitel’s mobile offerings. The move also helps Mitel expand into the Asia-Pacific region, where Polycom draws about a quarter of its revenue, says Kruger, and gives Polycom more of a foothold across Europe.
Diversified kicked off the stretch of major deals earlier this year, grabbing both Technical Innovation and The Systems Group in moves that expand both its footprint and expertise. Milestone added Vaddio, Almo acquired IAVI and Alpha Video bought Video Tech earlier this month to keep the fast pace going.
Kruger sees the industry going through a period of change and self-correction, saying the major deals these days are “mainly due to where the market is in its maturity level. There’s going to continue to be more consolidation. A lot of startups are strong in one area but they don’t have a broad portfolio so they need to merge or they’re not going to make it.”
The combined company will be headquartered in Ottawa, Canada, and will operate under the Mitel name while maintaining Polycom’s brand, according to the announcement. Mitel CEO Richard McBee will lead the combined organization and Mitel CFO Steve Spooner will continue in that role. Once the deal closes, Polycom is expected to get two seats on the Mitel board.
Mitel and Polycom will maintain separate booths at InfoComm 2016 and aren’t planning to show how their products can work together, says Kruger. They’ll be more likely to do that at trade shows and industry events that come after the deal becomes official, he says.
“Mitel has a simple vision – to provide seamless communications and collaboration to customers,” said McBee in the announcement. “To bring that vision to life we are methodically putting the puzzle pieces in place to provide a seamless customer experience across any device and any environment. The combined company will have the talent and technology needed to truly deliver integrated solutions to businesses and service providers across enterprise, mobile and cloud environments.”
The companies “expect to drive meaningful value for our shareholders, customers, partners and employees around the world,” said Peter Leav, president and CEO of Polycom, in the joint announcement. “We look forward to working closely with the Mitel team to ensure a smooth transition and continued innovation to bring the workplace of the future to our customers.”
The transaction is expected to close in the third quarter of this year, subject to stockholder approval by Polycom and Mitel, receipt of regulatory approval in certain jurisdictions and other customary closing conditions.