Yesterday, Avaya announced that Alan Masarek, its President and CEO, will retire at the end of the calendar year. His replacement will be Patrick Dennis, the current Chairman of the Board, effective September 1, 2024.
Masarek will be leaving a very different Avaya than the one he joined in July 2022. While his departure seems premature, he has dropped a few clues along the way that he was only there for the transformation. That sounds definitive, but businesses are always adapting and changing.
Masarek had an incredible two years at Avaya. He assembled a new leadership team, reset company culture, outlined a new vision and strategy, completely reshaped internal operations, and went through a comprehensive financial restructuring. He somehow managed to make it all look fun too.
Masarek’s exit at the end of this year should be relatively graceful compared to his arrival. In July 2022, Avaya announced a preliminary third-quarter warning of a major revenue decline — and then announced Masarek as its new CEO. Avaya was a public company, so it seems unlikely that the magnitude of the revenue drop was known during its CEO search and courtship. In fact, the company had just raised $600 million in new investment. Suddenly, after Masarek accepted the role, Avaya was plunging toward bankruptcy.
Masarek seems to believe that Patrick Dennis will inherit an operations and execution role — that seems unlikely. Dennis joined Avaya about the same as Masarek when he was appointed as an independent board member after Avaya completed its restructuring in May 2023. He has been an active board member and has worked very closely with Masarek on most issues, including strategy development and executive hires. His extensive experience and familiarity with the company's operations make him a strong successor from a continuity perspective.
Dennis has a few months to wrap up the sale of the company he currently heads (Venafi), plus a full quarter of transition assistance from Masarek. The succession planning seems too good to be an accident. Dennis already knows the board, leadership team, company strategy, and sector. He has industry experience from his board term but also from his prior role as CEO of Aspect and Alvaria. Dennis was leading Aspect when Abry Partners acquired it and Noble Systems to create Alvaria in 2021.
This touches on a key qualification Dennis possesses for the role: private equity experience. Apollo Global Management and other equity firms became majority owners after Avaya exited Chapter 11. Dennis has worked with private equity at Aspect and Alvaria and was previously an Operating Executive at Vector Capital.
During bankruptcy, there were concerns that the new board would liquidate rather than restructure. The board chose to restructure and gave Masarek the opportunity to rebuild Avaya. The new owners even increased their investment during the financial restructuring. The board also approved Avaya’s first post-bankruptcy acquisition a few months ago.
By selecting an insider and contributor to the turnaround, the board is signaling its ongoing commitment to the long-term play spearheaded by Masarek. Masarek will be associated with Avaya’s transformation and turnaround. Perhaps Dennis will be associated with an IPO?
On a personal note, I am disappointed to see Masarek leave. I know there is more he could contribute to Avaya. To be fair, he has been eager to declare Avaya transformed for some time. Back in December of 2022, he described restructuring the balance sheet as the final step in his five-step transformation plan. He considered the other four steps (product strategy, organizational clarity, and culture and talent) successfully transformed. Masarek’s departure is surprising in part because he seemed to be having fun at Avaya, but that’s more likely a personality characteristic. Masarek even seemed to enjoy the Chapter 11 process.
Transformations, of course, take time and are ongoing. Masarek focused on moving and aligning what he calls “the big rocks.” That leaves numerous medium and small rocks for Dennis to deal with. The acquisition of Edify accelerated Avaya’s CCaaS capabilities, but there are still gaps to build. The company just recently made significant changes to its go-to-market structure.
I met with Masarek in March and April this year at Avaya events. Things seemed good to me; however, I didn’t fully appreciate his revised eight-quarter transformation plan — this month marks eight quarters of his tenure at Avaya. Now we know that eight quarters is when a transformation is done (at least the big rocks).
Dave Michels is a contributing editor and Analyst at TalkingPointz.
