Mod1 Ca: Avaya Ipo Options

MOD 1 CA: Avaya IPO Options

Strategic Finance / FIN 501

MOD1 CA: Avaya IPO Options

Introduction

Avaya Incorporated is a global leader in telecommunications, information technologies, and computer networking services. The company provides a host of products and services, centered on business communications architecture, focusing in the integration of video-based hardware and software solutions (Avaya, 2011). Avaya’s headquarters is located in Basking Ridge, New Jersey, where it currently maintains its private corporation status. In June 2011, Avaya filed with the Securities and Exchange Commission (SEC) to carry out an initial public offering (IPO) of its common stock (Avaya Files, 2011). Investopedia defines an IPO as the first sale of stock by a private company, typically assisted by underwriting firm to determine the most viable type of security, offering price, and estimated market value (Investopedia, 2011). Avaya is considering both a traditional and online auction to conduct its IPO. Based on current market trends, advantages, and risks both IPO options, and the preferences of likely Avaya investors, the traditional offering method provides the most rational solution.

Avaya Investor Profile

Avaya offers a range of products and services supporting the information technology sector, which will naturally attract tech savvy investors who understand the potential for profits in this industry. Avaya investors will likely focus on the profit potential involved with unified communications and its broad application across the public and private sector. Avaya has access to a significant portion of the telecommunications market, given its history and involvement with both Lucent Technologies and AT&T. Furthermore, Avaya has already traded publically before its acquisition by Silver Lake and TPG Capital, so relative estimations of initial stock price may provide more predictability than other IPO’s. The large potential market, proven leadership...