Network equipment maker Avaya has accepted a $8.2 billion buy-out bid from a group of private equity investors.
An announcement had been expected, after details of a possible sale leaked out last month. Avaya’s management board has now confirmed it has accepted a joint bid from Silver Lake Partners and TPG.
The company had looked an enticing prospect for private equity firms, as it was cash-rich and had no debt. And the turbulence in the network market had made some sort of move likely.
Avaya has seen rivals such as Nortel Networks and Motorola undertake massive reorganisations, while Lucent and Alcatel merged – albeit with some ongoing difficulties.
In some ways, the deal can be seen as a “vote of confidence in the company”, said David Moloney, an analyst at Ovum. However, the new owners are likely to insist profit margins at the company increase, possibly to “Cisco-scale margins of 65%”, he adds.
In its last fiscal quarter Avaya reported net income of just $81 million on revenues of $1.3 billion. To push that figure up would require some painful measures, either cutting expenditure or pushing up prices.
Avays was spun out of Lucent Technologies in 2000.