Avaya has been in talks with Mitel since the beginning of the year about a deal that would value it at around $5billion - higher than private equity firms have offered, but would require Avaya shareholders to accept stock in the combined company.
Now Avaya is seeking to negotiate a sale to CD&R that would allow all its shareholders to cash out and value it at a significant premium to where its shares are trading, even though the headline price would be lower than a deal with Mitel, the sources said.
Shares jumped around 9 per cent on the news breaking.
Avaya's debt pile of $3.2 billion and its challenging business outlook have made a leveraged buyout difficult for many private equity firms.
CD&R has been in talks about partnering on its bid with RingCentral, a provider of enterprise cloud solutions, one of the sources said, cautioning that there is no certainty of such a deal.
Avaya CEO James Chirico told investors on the company's latest quarterly earnings call on Aug. 13 that he expected the sale process to conclude in the next 30 days.
Comms Business interviewed Chirico just four months ago where he declined to speculate on the rumours at the time.