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Mitel and Polycom announce $1.96 billion merger

Mitel and Polycom agree to a merger that strengthens each company's product portfolio and global market reach. The combined company will have $2.5 billion in annual revenue.

The recently announced merger of Mitel Networks Corp. and Polycom Inc. will provide their respective customers with the convenience of buying more unified communications from a single vendor.

Mitel announced late last week that it would acquire Polycom in a $1.96 billion cash-and-stock transaction that's expected to close in the third quarter. The deal is the result of talks between Mitel and Polycom that started in October 2015 at the behest of Elliot Management, a private equity group with investments in both companies.

Mitel is a Canadian-based provider of cloud unified communications (UC) and telephony services, while the San Jose, Calif.-based Polycom makes video conferencing technology and telephone equipment. The combined company will have $2.5 billion in annual revenue and more than 7,700 employees.

Tech buyer benefits in Mitel and Polycom merger

The merger will round out the companies' product portfolios, analysts said. Polycom customers will have the option of adding Mitel's cloud-based UC and collaboration platform, and Mitel clients will get easy access to Polycom's video and audio conferencing systems, which will keep the present brand.

"From a business standpoint, this makes perfect sense," said Irwin Lazar, an analyst at Nemertes Research, based in Mokena, Ill.  

It's getting to be a smaller and smaller [UC] market.
Irwin Lazaranalyst, Nemertes Research

From a global markets perspective, the companies will benefit from the other's reach in a different part of the world. Mitel gains access to the Asia Pacific region, and Polycom gets an entry point into Europe.

Polycom will be Mitel's sixth acquisition in four years. The Mitel and Polycom deal is expected to put Mitel on a more stable financial ground by reducing operating costs by $160 million through supply chain optimization and facilities consolidation.

The Mitel and Polycom merger is another example of the shrinking UC space, a trend that analysts said will continue throughout 2016. Other recent acquisitions include Dimension Data buying Ceryx, and Cisco purchasing Synata.

Further market consolidation means fewer alternatives for technology buyers negotiating deals for products and services.

"It's getting to be a smaller and smaller market," Lazar said. "You'll continue to see a lot of consolidation among vendors."

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