Mitel's $1.96 billion bid for video conferencing vendor Polycom has received the approval of regulators in the United States, with the Federal Trade Commission deciding to terminate the waiting period under an antitrust act.
The early termination of the waiting period in the Hart-Scott-Rodino Antitrust Improvements Act removed an obstacle to the proposed merger, which Mitel officials said will create a larger and more complete communications technology vendor that can better compete with such market leaders as Cisco Systems and Microsoft.
There are still a number of other hurdles that have to be cleared before the deal can close, including shareholder OKs and other regulatory approvals, according to Mitel officials. They hope to close the acquisition in the third quarter.
When Mitel and Polycom executives announced the deal in April, there had been months of reports leading up to that point that the two companies would eventually merge. The idea first came to light in October 2015, when officials with activist investor Elliott Management announced they had significantly grown Elliott's stake in both companies. Almost immediately, officials with the hedge fund began pushing the idea of merging Mitel with Polycom with the goal of creating a larger player in the quickly evolving unified communications (UC) and collaboration space. Elliott also wanted to increase the shareholder value of both companies.
"The combined business will have far greater scale than either company alone, the ability to deliver a full array of products to customers, and the means to invest behind product areas that will provide stability and growth for the future," Jesse Cohn, senior portfolio manager at Elliott and a driver of the hedge fund's growing activity in the tech industry, said in a statement after the deal was announced in April. "Financially, the combination will create a company with a strong balance sheet, meaningful synergies, and enormous cash flow generation that can be used to engage in value-generative M&A."
The collaboration space is undergoing significant transformation as customers—who are dealing with such trends as greater workforce mobility; the proliferation of smart, mobile devices; bring-your-own-device (BYOD); the rise of video; and the Internet of things (IoT)—increasingly are demanding more mobile and cloud-based UC solutions. Mitel CEO Rich McBee has been pushing his company toward the mobile and cloud spaces since taking over Mitel in 2011, with Polycom—and its wealth of video conferencing hardware and software—being a key part of the effort.
In addition, the competitive playing field in the UC market continues to shift, including through a range of acquisitions, including Nokia buying Alcatel-Lucent, ThinkingPhones buying Fuze (and then taking the Fuze name) and Cisco's various acquisitions, including of Tropo and Acano.
A merged Mitel and Polycom would have $2.4 billion in revenue, about 7,700 employees operating in 47 of the world's 50 largest economies and an installed customer base of more than 82 percent of the Fortune 500 companies. It also would hold the top position in such markets as business cloud communications and conference phones, and be No. 2 in video conferencing and installed audio, officials said.
There would be about $160 million in operational savings by 2018 through such benefits as supply chain optimization, economies of scale and the closing of some facilities. Mitel will keep the Polycom brand.