The Financial Times has commented:
The maker of business communications hardware and software will be an interesting test case for investors, who have rushed to buy fast-growing web technology groups, but have shied away from large, economically sensitive firms that sell tech to industry.
Avaya generated $5.06bn in sales in its last fiscal year, ending in September, a jump of 21 per cent from the previous year. It narrowed its net losses from $420m in 2009 to $381m last year.
Since being taken private in 2007, Avaya’s management led by Kevin Kennedy, chief executive, has focused on developing sophisticated “unified communications” software and desktop systems. Gartner, the market research company, ranks Avaya as a leader in the corporate telephony, contact centre and unified communications markets.
The company consolidated its position in these markets in September 2009 when it outbid Siemens Enterprise Communications and paid $915m to acquire Nortel Enterprise Solutions business after Nortel filed for Chapter 11 bankruptcy.
Kennedy told the Financial Times in May that the integration of that business was now complete.
The company is heavily leveraged. The $8.3bn deal by Silver Lake and TPG to buy-out Avaya in 2007 included $5.9bn in debt, and additional debts were raised to finance its acquisitions since then.
With net debt of $5.7bn, against earnings before interest, taxes, depreciation and amortisation of $795m, adjusted for compensation and one-time expenses, the company is leveraged at a ratio of about seven times.
The group plans to use the IPO proceeds to pay down debt, as well as buy out equity contributed by Silver Lake and TPG to its acquisition of the Nortel unit.
For the firms to turn a profit on the sale, the shares would need to sell at more than the $17.50 paid in 2007. The share price target for the deal was not disclosed in the initial filing in New York.