After a period of turmoil, Synchronoss Technologies, the Bridgewater-based company that built its business by solving the phone-activation problems of mobile communications companies, has found a way out of its dark hole.
This week, Synchronoss said that the best approach for achieving the company’s goal of maximizing shareholder value is to focus on its core communications and media businesses; divest non-core assets; and improve the company’s balance sheet strength, cash position and potential profitability.
Synchronoss’ problems began with its acquisition of Intralinks, at the beginning of this year. That acquisition signaled the company’s strategic move into the enterprise software marketplace. Not long after the deal closed, however, it was clear that the acquisition was not working, and the company parted ways with Intralinks president and CEO Ronald W. Hovsepian, who had come on board as CEO of Synchronoss.
A series of discussions ensued with the company’s backer, Siris Capital Group, which on June 23 had presented a nonbinding indication of interest in acquiring Synchronoss. In light of the indication of interest, the company’s board decided to explore “a broad range of strategic alternatives that may have the potential to unlock shareholder value.”
Earlier this month, Siris indicated that it wanted to negotiate with Synchronoss exclusively. Synchronoss responded that it couldn’t give exclusivity, but when Siris came back with significantly better terms than had been offered before, Synchronoss’ board authorized exclusivity for a limited time.
Funds affiliated with Siris will acquire Intralinks for approximately $1 billion. Siris will also invest in Synchronoss convertible preferred equity in the amount of $185 million. Siris’ investment will initially be convertible into approximately 19.8% of Synchronoss’ common stock. The sale of Intralinks is expected to close in mid-November this year, and the sale of the preferred stock is expected to close in the first quarter of 2018. Both transactions are subject to closing conditions, the company said.
Stephen Waldis, the founder and CEO of Synchronoss, said in a release, “We plan to use the proceeds from the Intralinks transaction to retire term loan debt and use the Siris $185 million investment to drive future growth opportunities in the Company’s Communications and Media business.”
The company says that it will now focus on three core areas:
- Cloud: Synchronoss sees opportunities “to leverage its existing relationship with Verizon to extend its cloud relationship, innovate product features and value, and pursue new revenue streams. The Company is also focused on executing its identified international growth opportunities with revamped products.”
- Messaging: The messaging platform “is a leader in white label email solutions with a highly developed multi-channel messaging solution.” The company says that it’s “well-positioned for the next-wave evolution of messaging monetization and has identified opportunities in U.S. and Asian markets.”
- Digital Transformation: “The company is a core solutions provider to carrier consumer customers. Synchronoss continues to see strong cash flow generation, new customer acquisitions, including a recently signed new contract with Sprint, and a healthy pipeline of additional growth opportunities.”