Private Equity Sniffing Out Motorola, Nortel Deals?

With Nortel already in bankruptcy and Motorola mired in a slog of bad news following its unsuccessful attempt to spin off its struggling handset unit, rumors are swirling that private equity firms are circling the troubled companies.

Nortel has already collapsed into bankruptcy protection while Motorola simply keeps collapsing with its stock price currently just a few ticks above its 52-week low. The ongoing woes of the former tech titans is now drawing the attention of private equity firms, according to rumors swirling around the Internet.

According to the Financial Times, at least two private equity firms are investigating the possibility of buying Motorola's failing handset unit and combing it with assets cherry-picked from telecommunications supplier Nortel's bankruptcy proceedings. Quoting an unnamed source "with knowledge of the situation," Advent International is seeking partners to take over Motorola's handset division as well some Nortel units.
Advent International is a global buyout firm with offices in 15 countries on four continents. The firm focuses on international buyouts, strategic restructuring opportunities and growth buyouts in five core sectors. Since its founding in 1984, Advent has raised $24 billion in private equity capital and, through its buyout programs, has completed more than 250 transactions valued at more than $40 billion in 40 countries.
The Financial Times story claims CVC Capital Partners, another global private equity and investment advisory firm, was approached by Advent International to pursue a deal combining assets from Motorola and Nortel. CVC declined to participate in the deal.
A year ago, Motorola announced it planned to spin off its ailing handset division, but the economy went south and the crumbling credit markets rendered the grand plan moot. Faced with hard reality, Motorola began cutting jobs, axing approximately 3,000 workers in the fourth quarter of 2008 alone.
Then things really turned bad. The job cuts didn't stanch the bleeding and sales continued to tumble, with once-proud Motorola falling to fourth place among handset makers behind market leaders Nokia, Samsung and LG. Motorola took the next inevitable step Jan. 14, announcing that another 4,000 employees-3,000 in the handset division-would be given immediate pink slips.

Sanjay Jha, the co-CEO of Motorola who was brought in from Qualcomm in August to lead the now failed spinoff, said in January he hopes a commitment to and a leap of faith with Google Android and Microsoft Windows Mobile as Motorola's future operating systems will turn the tide for the company. Jha said in October 2008 that Motorola would ditch at least four operating systems, including Symbian, to focus on developing mid-tier phones running Android and high-end enterprise devices operating on Windows Mobile.

The problem for Jha and Motorola is the transition will take some time. Jha predicted it would take until the third quarter of 2010 to bring out a Windows Mobile phone targeted at enterprises and probably until the 2009 Christmas season before a Motorola-built Android phone could hit the market.

Meanwhile, the private equity firms are circling.