Ericsson’s $6.2bn Acquisition of Vonage

By Martin Palomar, Dorian Song, Théo Leleup, and Tom Bendinelli (HEC Paris), and Michele Bolognesi, Luca Introna, Andrea Zenoniani, Miki Borowiak, Edoardo Borsoi, and Sonia Andrzejuk (Bocconi)

 

Overview of the deal


Acquirer: LM Ericsson AB

Target: Vonage Holdings

Implied Equity Value: $5.3B

Total Transaction Size: $6.2B

Announced date: 22 November 2021

Expected completion date: 30 June 2022


On the 22nd of November 2021, Ericsson announced its acquisition of all of Vonage’s outstanding shares with an all-cash transaction for a total equity value of $5.3B.


The offer price of $21 represents an announced bid premium of 28.3%, based on Vonage's closing share price of $16.37 on the 19th of November 2021 (the last available trading day before the announcement).


Vonage Holdings, a New Jersey-based online cloud communications hosting services provider, and its presence in the Communication Platform as a Service (CPaaS) segment will provide Ericsson with an opportunity to access this complimentary market that is expected to reach $22B by 2025, growing at 30% annually.


Overall, the transaction will be accretive to Ericsson’s EPS and free cash flow from 2024 onwards and deliver near-term revenue synergy opportunities, including white-labeling and cross-selling of the combined product portfolio estimated to contribute $400M by 2025. Ericsson also expects to achieve some cost efficiencies following the completion of the transaction.


“The acquisition of Vonage is the next step in delivering on that strategic priority. Vonage gives us a platform to help our customers monetize the investments in the network, benefitting developers and businesses” - Börje Ekholm, President and CEO of Ericsson

Company Details (Telefonaktiebolaget LM Ericsson)


Telefonaktiebolaget LM Ericsson, together with its subsidiaries, is one of the leading providers of communication infrastructure, services, and software solutions to telecom and other sectors. It operates through four segments: Networks, Digital Services, Managed Services, and Emerging Business.


Founded in 1876, headquartered in Stockholm, Sweden.

CEO: Börje Ekholm

Number of employees: 102,203

Market Cap: $34.491B (as of 03/12/2021).

EV: $31,66B

LTM Revenue: $ 25,26B

LTM EBITDA: $4,01B