Mitel To Buy ShoreTel

Jul 2017

Mitel just announced that they signed a definitive agreement to purchase all of ShoreTel’s outstanding shares at a price of $7.50 per share, which values ShoreTel at an enterprise value of $430m in an all cash deal. To accomplish the acquisition, Mitel announced they would be taking on over $300m in additional debt.  But this isn’t the first time these two have been linked.  In 2014, ShoreTel declined an offer from Mitel for $574m. And last year, Mitel dismissed rumors they were once again interested in ShoreTel saying the purchase didn’t make financial sense.

Shoretel under water

What Changed?

Over the last 12 months, Mitel attempted to purchase Polycom but was left at the alter in the 11th hour. During the same time, ShoreTel announced they were looking at strategic alternatives for the company including the option of selling the business. With the Polycom deal off the table, it appears Mitel changed course with a cloud-first strategy and took aim at a wounded competitor in ShoreTel.

Mitel Blue & Mitel Orange?

Now that the definitive agreement is signed, Mitel has the tall task to create the synergies that they envision for the combined business. Announcing that all branding will move to Mitel, it seems that the beloved ShoreTel orange will soon hit the scrap heap.  To achieve the hoped-for $60m in cost savings, significant layoffs from within the ShoreTel organization are almost certainly in the future.

More importantly, the rabid ShoreTel Partner community is presumably being left to sell Mitel, and possibly left without the aid of their legacy ShoreTel sales support organization.  With these and other challenges coming down the path, what should customers expect?  Certainly, support will be available for those on premise ShoreTel customers, but significant risk for end of life on those systems now exists. The existing ShoreTel cloud based customers will also have to entertain a new roadmap for platforms, billing, and support.

We all remember when the beloved Nortel was acquired by Avaya becoming Avaya Blue. The great synergies, customer base, technology, patents, and distribution channels – all the essential elements underpinning Avaya’s strategy – evaporated more quickly than any of us in the industry expected. Hopefully this time, ShoreTel doesn’t become Mitel Orange and Mitel doesn’t end up like Avaya.
 
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