Mitel is set to acquire Inter-Tel in a deal designed to meet the demand for IP telephony from small and mid-sized businesses.

Even though both companies sell similar products and services and are in some of the same markets, the companies only occasionally compete for customers, said Don Smith, CEO of Mitel.

The acquisition will allow Mitel to learn from Inter-Tel's experience offering managed services and leasing, and Inter-Tel is likely to be able to go after larger accounts because of the acquisition, he said. The companies have no idea yet how staffing levels might be affected by the deal, he said.

The acquisition was largely about adding scale and incremental research and development capabilities to Mitel, he said.

The move means that Mitel will shelve its IPO (initial public offering) because the combination will help it achieve the next step in its growth plans, Mitel said. "In the fullness of time, we would expect to be back at it," Smith said.

The combined private company will support the Mitel and Inter-Tel brands and should bring in about $800 million in annual revenue, twice that of the current Mitel.

Mitel designs, markets and sells a range of communications products including PBX systems, IP integrated communications products, network management software and telephones. Inter-Tel sells an array of similar products, also to large, medium-size and small businesses, including VoIP platforms, managed communications services and converged IP PBX products.

The boards of both companies have approved the deal, but Inter-Tel stockholders and regulatory groups must also approve it. The companies expect the transaction to close in the third quarter.