Back in October 2007, Silver Lake and TPG took Avaya private in an $8.2 billion deal. While the transaction involved a good amount of debt, it looks like the company has firepower. That is, Avaya has agreed to pay $900 million for Nortel Network's Enterprise division (the transaction will also involve $15 million in employee retention payments).
The transaction was the result of an auction, which appears to have had some juice. Keep in mind that Avaya's original bid was for $475 million.
The Enterprise division has a wide array of product offerings, such as advanced phone systems. What's more, there is a strong footprint in the U.S. federal government space.
For the first half of this year, the Enterprise division posted revenues of $860 million, which is down from $1.25 billion in the same period a year ago.
The deal also is a shot against Cisco (NASDAQ: CSCO). With the Enterprise deal, Avaya will bulk up its market share. And, ultimately this is a way to make Avaya an attractive buyout target itself.
As for Nortel, the company is in the process of unwinding its operations, which seems to be going smoothly so far.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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