Mitel acquires competitor ShoreTel for $430 million

The number of players in the Unified Communications-as-a-Service (UCaaS) market has just gotten a little bit smaller.

This morning Mitel announced that it has entered into a definitive merger agreement pursuant where it will acquire 100 per cent of the outstanding shares of ShoreTel common stock. This is an all-cash transaction at $7.50 per share, with a total equity value of about $530 million and a total enterprise value of about $430 million. The transaction is expected to close in the third quarter of 2017.

The move shores up Mitel’s enterprise UCaaS capabilities as the telecommunications company continues to shift towards a cloud dominated market with digital transformation on the mind. Specifically, ShoreTel’s enterprise solutions will help Mitel’s customers become cloud-enabled with their existing on-premises or mixed deployments. This provides a pretty significant boost to the Ottawa-based Mitel. According to the company, with the acquisition of ShoreTel, it has become the number two player in the UCaaS market.

“We are seeing a fundamental shift in the market,” said Mitel CEO, Rich McBee in an investors call this morning. “With the acquisition of ShoreTel we are accelerating our move-to-the-cloud strategy. We will be well placed in order to meet the digital transformation demands from our customers for cloud-based solutions globally.”

Mitel highlights that the combined sales of the two companies totaled $1.3 billion in the 12 months before March 31, 2017. The acquisition is expected to increase Mitel’s total recurring revenue to 39 per cent of its total revenue, and double the company’s UCaaS revenue to $263 million. Mitel expects to be accretive to non-GAAP EPS in the first year following the closing of the acquisition.

“I think what is interesting, especially for Canada, is the SMB segment, which is the majority of the Canadian marketplace,” said Roberta Fox, chief innovation officer of Fox Group to CDN. “ShoreTel products have a good fit for that, as does Mitel. Bringing ShoreTel products over to the Mitel dealers, and vice versa, is a good fit.”

Combined, Mitel will now have roughly 3,200 channel partners with the addition of ShoreTel. This announcement comes just a few weeks after Mitel announced that it was acquiring Toshiba’s unified communications business, including Toshiba’s channel partners.

“There is very little overlap between channel partners, making this an opportunity for us to expand our channel ecosystem,” said Todd Abbott, executive vice president of Global Sales at Mitel to CDN. “If you are a ShoreTel partner we are going to welcome you into the ecosystem. There will be a consolidation of the channel programs but my message to them would be no change this year.”

The plan Mitel had in store for its channel program was to role out changes next year, and those changes will now include the consolidation of the ShoreTel partner program as well. Mitel will begin to communicate these changes with partners in Q4 this year to make sure that the company and its partners are aligned, before announcing the consolidated program around February 2018.

“Our view is that channels want a level of predictability so that they can run their business, so there won’t be any sudden changes,” said Abbott.

The ShoreTel acquisition continues to signal the further consolidation of the UC space.

“If you look back in history of technology, it all consolidates around two or three players over some period of time. This happens at different paces but it happens because size matters – you need to have enough R&D to continue to drive innovation that is required to be more productive and effective,” said Abbott.

“I think there is still going to be some more consolidation. There are still too many players in the market,” added Fox.

Keep an eye out on the UC space. Mitel has got the ball rolling by adding Toshiba and ShoreTel, and it could just be the beginning.

 

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Jim Love, Chief Content Officer, IT World Canada

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Alex Radu
Alex Radu
is a staff writer for Computer Dealer News. When not writing about the tech industry, you can find him reading, watching TV/movies, or watching the Lakers rebuild with one eye open.

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