Mitel Still on Acquisition Trail Despite Failed Polycom Bid

CEO Rich McBee says since pulling out of the deal last month, the company has seen a strong uptick in other companies looking for a possible buyer.

Mitel CEO

Mitel's failed bid to buy video conferencing vendor Polycom isn't slowing down the company's ambitions to use acquisitions to help it grow its place in the highly competitive business communications marketplace.

In a conference call to review the company's latest financial quarter, Mitel CEO Rich McBee said that the Polycom situation helped the company hone its mergers-and-acquisitions policies, gave it a $60 termination fee from Polycom and "significantly raised Mitel's profile as a market consolidator."

"Immediately following the termination of the deal, we experienced a notable increase in the number of expressions around interest in other companies seeking a strong … partner such as Mitel," McBee said, adding that every opportunity will be reviewed and judged on its merits and that the company will be disciplined in its evaluations.

Since joining Mitel in 2011, McBee has looked at acquisitions as a key driver in the company's push into the mobile and cloud communications space. He has viewed the unified communications (UC) space as ripe for consolidation, and has determined that Mitel will be a buyer and not a seller.

The results for the company have been somewhat mixed. The company has bought Aastra Technologies and Mavenir Systems, moves that fed directly into the cloud and mobile pushes. However, Mitel in 2014 failed in an effort to buy rival ShoreTel when that company's board of directors rejected the $574 million offer as being too low. Earlier this year, the company—urged on by activist investor Elliott Management, which had taken significant stakes in both Mitel and Polycom in late 2015—made a $1.96 billion bid for Polycom.

The deal was moving forward until this summer, when private equity firm Siris Capital put in a $2 billion proposal, a move that McBee said changed the financial dynamics of the deal and convinced him to pull out of the bidding and take the $60 million termination fee from Polycom.

However, the deal got Mitel a lot of media and analyst coverage and raised the awareness of the company in the marketplace, leading other vendors to take a closer look at Mitel as a possible acquirer.

"So we have a lot of opportunities that have been inbound to us from companies that weren't or did not want to look at coming together in the past," he said.

Mitel's moves in the market also come at a volatile time in the communications industry as more vendors look to build out their portfolios to meet the growing demand from customers for cloud- and software-based solutions. The market is dominated by Microsoft and Cisco Systems, but among the moves over the past couple of years has included Nokia buying Alcatel-Lucent, Unify being bought by Atos and Lifesize shifting its business model to the cloud and spinning out of Logitech to become an independent company.

Also on Aug. 4, ShoreTel officials said they were creating a strategic advisory committee comprising some board members that will review various options for the company's future, which could include everything from selling all or parts of the company to entering into joint ventures and partnerships.

Overall, Mitel reported $307.7 million in revenue for the quarter, compared with the $298.4 million from the same period in 2015. Income came in at $23.8 million, up from $14.2 million last year. The cloud business added 31,000 seats—up from 18,000 the previous quarter—bringing the total number to 451,000. On the mobile side, Mitel added 15 new wins, bringing the total to 50, according to company officials.