Initial Public Offering: A Case Study of Avaya

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When a firm has decided to undertake an initial public offering (IPO), the firm needs to determine how it wants to go about that process. There are a number of factors that the company needs to take into consideration. These include the expected buyers, the price, the method of the offering (online or traditional) and the choice of brokerage. Avaya is a phone systems maker that has a value of approximately $1 billion. The market for technology-based IPOs is good right now, with several companies coming to market. Not all the IPOs have been successful, but certainly firms whose brands are known like LinkedIn have been successful. For companies with a lower profile among consumers, they are more likely to sell their IPOs to institutional investors such as mutual funds, pension funds and high net worth investors that constitute the preferred clients of brokerage houses. One of the first decisions that Avaya needs to take into consideration is who is likely to buy the IPO. The traditional IPO path holds that a broker will put together a syndicate of brokerage houses that will each take a piece of the IPO (Kamlet & Rini, 1995). They will then portion out the shares they receive to their customers, usually with priority going to the largest and best customers. Avaya, whose true value may actually be much higher than a $1 billion valuation (Klassen, 2011), should be a popular offering if investors can be convinced that the valuation on the IPO is significantly lower than the

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