The potential for mergers and acquisitions in telecom continues to be high, agreed company leaders at the recent Telecom Exchange event in Denver. With big-name companies such as Google and Facebook looking for ways to spend cash and a good equity market, the biggest issue may be that many desirable companies have already been purchased.
Bandwidth infrastructure provider Zayo Group in particular knows the ins and outs of mergers very well. The Boulder, Colo.-based company was started in 2007 with a hefty cash flow from investors and has made 28 acquisitions to date to extend its reach for fiber, colocation and transport services.
“It’s one of the things we’re good at, but that’s been hard work,” said Glen Russo, EVP of corporate strategy and development for Zayo, during a session. He noted that as Zayo had made acquisitions, it looks for well-run businesses that will add value to the business and could have an orderly transition, and the company integrates its acquisitions completely rather than running them as separate entities.
“We didn’t pick up a lot of messes that you had to go clean up,” Russo told Telecom Exchange attendees, adding that while M&A is a “core competency” for Zayo, some businesses find it difficult to resist the chance to acquire a competitor even if they don’t have much experience in M&A. “It’s easy to envision how you create value, but it’s hard to pull off,” he noted.
Phil Olivero, CTO of Lightower Fiber Networks, said that his company often looks for companies operating in contiguous markets or to fill in assets that it needs in markets where it currently operates. Rich Ruben, CEO of wireless backhaul provider PEG Bandwidth, told attendees that when his company has made the recent acquisition of Contact Network Inc. (which did business as InLine in Mississippi and Alabama), it considered the strength of the company’s local sales operations in new areas where PEG could expand its revenue base.
Although each company had a slightly different approach to M&A, all agreed that market conditions are supportive of M&A and that companies with assets such as network infrastructure are likely to be attractive. With large companies often having substantial cash on hand, many would rather make a purchase than return the money to shareholders and as Olivero noted, companies creating more content to exchange and view online “is only good for us” in telecom.
See RCR’s video interview with the head of Zayo’s wireless backhaul business.
Watch an interview on trends in wireless backhaul with Rich Ruben of PEG Bandwidth.
See more Telecom Exchange West videos.
