On July 27, 2017, Mitel and ShoreTel announced that they have entered into a definitive merger agreement. Mitel will acquire 100 percent of the outstanding shares of ShoreTel common stock at $7.50 per share. The purchase price represents a 28 percent premium on ShoreTel’s closing share price on July 26.

The announcement didn’t come as much of a surprise to those of us in the industry. Mitel has acquired five other companies since 2013, and even made a bid for ShoreTel back in 2014. Although that offer was rejected by ShoreTel’s board, it was really only a matter of time before ShoreTel was acquired.

If you have invested in ShoreTel equipment, you may be wondering what this means to your organization. No one can see the future, of course, but here is UtiliComm’s perspective.

This merger is about Mitel’s cloud-based Unified-Communications-as-a-Service (UCaaS) strategy. With the stroke of a pen, Mitel has more than doubled its UCaaS revenue to $263 million, and increased its recurring revenue to 39 percent of total revenue. The recurring revenue that comes from subscription-based cloud services makes Wall Street happy.

If the deal goes through as expected, it will create an entity with global sales of $1.3 billion. The combined company will be the No. 2 player in the UCaaS market, with an industry-leading portfolio of communications and collaboration solutions. Mitel will be able to accelerate its growth in the UCaaS market, and deliver the cloud-based solutions customers increasingly demand.

Together, the two companies have about 3,200 channel partners and approximately 4,200 employees. However, Mitel sees significant opportunities for “synergies” that will reduce costs by $60 million annually. Over the next two years, Mitel plans to implement supply chain efficiencies, eliminate redundancies and overlapping programs, streamline infrastructure and operations, and optimize R&D. However, Mitel and ShoreTel have pledged “continued support and an attractive path forward for all customers and partners.”

We don’t expect much to change in terms of ShoreTel’s technology. The ShoreTel Connect platform, which provides a single software code base and unified experience across cloud, on-premises and hybrid deployments, has been well received in the industry. Odds are, Mitel will build upon ShoreTel’s technology roadmap, and leverage ShoreTel’s solutions to strengthen its ability to deliver cloud-based services to customers with existing on-premises and hybrid platforms.

That said, mergers and acquisitions are key strategies in many segments of the IT industry. The pace of development is warp speed, and there is always need for additional investment capital. Companies like ShoreTel often struggle to innovate while meeting the bottom-line demands of their shareholders. Companies like Mitel are looking to increase market share, and acquisitions enable them to accomplish that objective.

Since 1999, UtiliComm has helped customers stay as up to date as their business communications require. We’ve seen manufacturers come and go, and have navigated dramatic changes in technology. We’ve been around too long to engage in knee-jerk reactions. However, we do keep our eyes open and constantly assess what’s available in the context of our customers’ current and anticipated needs. We remain committed to that effort and are here to help you determine the best technology strategy for your business.

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