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May 23, 2016
martinwolf Transaction Analysis
Silver Lake and TPG Capital Reportedly Consider Sale of Avaya
 
Financial Information
  • Not Disclosed
Transaction Facts
  • According to media reports published late last week, Silver Lake Partners LP and TPG Capital LP are considering a sale of telecommunications equipment provider Avaya Inc.
  • Citing people familiar with the matter, the articles state that a transaction would value the company between $6 and $10 billion, including debt.
  • Avaya did not comment on these specific rumors, but on Avaya's earning call last week CEO Kevin Kennedy announced that "Goldman Sachs is helping Avaya evaluate expressions of interest that have been received relative to specific assets, as well as explore other potential strategic opportunities."
An Opportunity for a New Beginning
  • When A Strong Cash Flow Is Not Enough: Avaya generated more than $900 million in adjusted EBITDA last year, but the company has consistently operated at a loss due to is interest expenses (more than $400M every year). In addition, the company faces a $600M debt maturity due in October 2017, and it needs to raise significant cash to pay that off.
  • Squeezed on All Sides: Avaya faces pressure both from larger competitors like Cisco as well as smaller peers, many of whom have embraced cloud-based models. In its latest results, published last week, Cisco beat on earnings and gave positive guidance-sending its stock higher. But Avaya has struggled compared with its better-capitalized rival, and it faces challenges in adapting to the evolving enterprise telephony environment.
  • Rocky Road: Since being acquired by TPG Capital and Silver Lake Partners for $8.2 billion in 2007, the company has seen a few fits and starts on its road to return. The company initially filed for an IPO in 2011 but was delayed reportedly out of concern for low demand. In 2013, the company allegedly held discussions with Oracle regarding a potential acquisition, before that too fell through. Though at times there were rumors of a new IPO, the company has remained a portfolio asset of Silver Lake and TPG Capital.
  • History of Success: Both Silver Lake and TPG are known for their high profile successful investments in the technology space, from Silver Lake's investments in Dell and Alibaba to TPG's positions in tech darlings Uber, Airbnb and Spotify.

For more information about this transaction, click here to read the news report.


martinwolf was not the advisor in this transaction.

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With offices in the San Francisco Bay Area, martinwolf is a leading M&A Advisory focused on middle market companies in the IT Services, IT Supply Chain, IT-Enabled Business Process Outsourcing and Software as a Service (SaaS) space. Since 1997, our team has completed more than 140 transactions in nineteen countries and sold seven divisions of Fortune 500 companies. 

 

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