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Ericsson to buy cloud firm Vonage for $6.2 billion

Earlier this week, Ericsson (ERIC) announced that it had reached an agreement to acquire cloud communications company Vonage (VG) for a total of $6.2 billion.

A year later, the Swedish company announced the acquisition of wireless networking company Cradlepoint in the United States for $1.1 billion, which will be completed in 2020. This was the company's largest transaction in years.

It was announced by Ericsson in a statement that "the Vonage Board of Directors unanimously approved the merger agreement."

"By 2030, the transaction will contribute to Ericsson's stated goal of global expansion in wireless enterprise, by providing existing customers with a greater share of a $700 billion market."

During the fiscal year that ended September 30, 2021, Vonage reported $1.4 billion in revenue, a margin on adjusted earnings before interest, taxes, and depreciation (EBITDA) of 14 percent, and free cash flow of $109 million.

Following Borje Ekholm's appointment as CEO in 2017, the acquisition heralds the beginning of a new era for the company.

Ericsson's entry into the multimedia market in the early 2000s prompted him to concentrate his efforts on restructuring and refocusing the company. In addition to experiencing difficulties integrating new acquisitions into its operations, it also experienced pressure on margins and profits.

More than 120,000 customers and more than one million registered developers use Vonage's cloud-based communications platform worldwide, according to the company.

After deducting non-cash amortization effects, Ericsson stated that the transaction would increase earnings per share and free cash flow beginning in 2024.

Under normal circumstances, the transaction is expected to close in the first half of 2022 if all necessary approvals are obtained from shareholders, regulators, and other closing conditions.

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