Tim Mueller’s Transaction Analysis: New IT M&A Deals April 25

Searchlight Capital Partners to Acquire Mitel for $2.0B

Financial Information*

  • Transaction Value $2.0B
  • EV/LTM Revenue 1.06x
  • EV/LTM EBITDA 15.12x

Transaction Facts

  • In an all-cash deal worth $2.0 billion, Mitel Networks (Nasdaq: MITL) today announced it has entered into a definitive arrangement agreement to be acquired by an investor group led by Searchlight Capital Partners.
  • According to the agreement, Mitel shareholders will receive $11.15 per common share in cash — a 10 percent premium to the stock’s Monday closing price. Mitel’s market cap was $1.57 billion yesterday evening on the Nasdaq, making the acquisition deal a 24 percent premium over the average price on the stock’s 90-day average.
  • The deal is expected to close in the second half of 2018, upon which the enterprise communications company will go private.
  • Mitel shares went up by as much as 14 percent in pre-market trading today.

Going Private To Shift Gears

  • Bidding War: The Canada-based company is an enterprise communications legacy player, now 45 years old, competing with Cisco and Avaya. Operating in 100 countries with 70 million businesses as customers, the company has made its name mostly from its IP telephony solutions (Mitel and Facebook settled out of court in 2013 regarding patents for the former’s text-based communications technology and Internet telephony services).
  • New Strategy: Mitel has previously used M&A to grow, acquiring ShoreTel last year for $430 million. The company also tried but failed to buy Polycom in 2016 for ~$2 billion after Siris Capital disrupted the deal with a higher offer. Now, as the company prepares to go private, the company may be able to focus on pursuing a more efficient move to the cloud as well as a new go-to-market strategy.
  • Inevitable Transition: The enterprise communications market has seen more intense competition over the past several years, with customers preferring to have products simplified in single platforms or upstart services. In addition, the shift to BYO, mobile-first solutions, integrated IT stacks and cloud has created a league of new companies offering simplified services. As a result, Mitel has been facing challenges from competitors of all sizes. Whether they are single vendors like Microsoft or platforms like Slack, competitors have made it more difficult for Mitel to take up its new identity as a cloud-based, integrated SaaS company.
  • Déjà vu: Searchlight Capital has experience taking on a legacy company before. In August 2016, the firm took a strategic stake in managed cloud company Rackspace, which was taken private through an acquisition led by funds managed by affiliates of Apollo.

For more information about this transaction, click here to read the press release.

*Financial information from the press release and FactSet.

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