By Dan Baldwin, Editor
951-251-5155 email
Since 1996, Telecom Association ("TA") has been in the business of facilitating communications between our 3,800 agent and vendor members. Towards that end, TA is now taking an active role in facilitating member acquisitions.
OVERVIEW
This report and checklist provides TA members a current understanding of "who's buying what" as well as a checklist of "how to prepare" a company to be acquired. The purpose of educating our audience on these two points is to maximize post-acquisition value for both companies in any TA facilitated transaction.
To ensure full adherence to all legal matters relating to pre- and post acquisition disclosure requirements, TA has contracted with Telecom Lawyer Ben Bronston to facilitate all acquisition communications. To offset the costs of facilitating acquisitions, TA may accept reasonable remuneration from parties to a successfully concluded transaction.
If you seek to acquire another business or become acquired, please email me a request for an acquisition screening so that TA may assist your efforts. TA will keep all acquisition screening information confidential until such time as it seems appropriate to introduce parties to one another under a non-disclosure agreement.
Click here to print this 11-page report.
WHAT'S RECENTLY BEEN SOLD?
Certainly the best gauge of future acquisition activity is to look at recent transactions. Following is a list of interesting purchases over the past several years. Please email me information you think an item should be added to this list.
Click on the press release to read the background behind the sale. The purchaser is the first company listed.
Agency M&A
ARG & NetGain (2010) Press release
Intelisys & PartnerTel (2010) Press release
Intelisys & Resource Communications (2005) Press release
Intelisys & Vision Consulting (2011) Press release
MicroCorp & Five Star Communications (2011) Press release
MicroCorp & Premier Managment Group (2011) Press release
MicroCorp buying agent bases 2011
PartnerTEL & Telesis Management (2006) Press release
X4 Merger (2004) Press release
Carrier M&A
8x8 & Contactual (2011) Press release
ANPI & Zone Telecom (2011) Press release
Appia & Connect (2010) Press release
Appia & Voxitas (2010) Press relese
Asia Netcom & Pacific Internet Merge & Create PacNet (2008) Press release
Aspect & Quilogy (2010) Press release
BCN/NUI & Norcom (2002) Press release
BCN/NUI & Telcorp (2003) Press release
BCN & NAS (2003) Press release
BCN & Cornerstone (2004) Press release
BCN & Marathon (2006) Press release
BCN & WCS Telecom (2006) Press release
BCN & TSI (2008)
BCN & Powercom/Lambeau (2009) Press release
Birch & Cordia (2011) Press release
Broadview & ATX Communications (2006) Press release
Broadview & Info Highway (2007) Press release
Broadvox & Cypress Communications (2010) Press release
Carousel Industries & OmniPresence, TAC Centre & Juma Technology (2011) Press release
Cavalier & Talk America (2006) Press release
CenturyLink & Embarq (2008) Press release
CenturyLink & KMC Telecom (2005) Press release
CenturyLink & Qwest (2011) Press release
CenturyLink & Savvis (2011) Press release
CenturyLink downgrade due to acquisitions 2012
Comcast & Cimco (2009) Press release
Comcast & New Global Telecom (2010) Press release
ConnectWise & CharTec (2010) Press release
Covad & DataFlo (2006) Press release
Covad & NextWeb (2006) Press release
Dimension Data & Xigo (2012) Press release
EarthLink & Business Vitals (2011) Press release
EarthLink & ITC^DeltaCom (2010) Press release
Earthlink & NewEdge (2006) Press release
EarthLink & One Communications (2010) Press release
EarthLink & STS Telecom (2011) Press release
EarthLink & Synergy Global solutions MSP services (2011) Press release
Eureka & InfoHighway (2005) Press release
FairPoint & Verizon (2008) Press release
First Communications & Acceris (2006) Press release
First Communications & Corecomm & Acction Communications (2005) Press release
First Communications & GCI Globalcom Holding, Inc. (2008) Press release
Frontier & Verizon (2010) Press release
GLOBALINX & TMC Communications (2011) Press release
GTT & PacketExchange (2011) Press release
GTT & WBS Connect (2009) Press release
HickoryTech & CP Telecom (2009) Press release
HickoryTech & IdeaOne (2012) Press release
IDT & Net2Phone (2006) Press release
Integra & Eschelon (2007) Press release
Level3 & Broadwing (2007) Press release
Level3 & Global Crossing (2011) Press release
Level3 & ICG (2006) Press release
Level3 & Looking Glass (2006) Press release
Level3 & Progress Telecom (2006) Press release
Level3 & SAVVIS CDN services (2007) Press release
Level3 & TelCove (2006) Press release
Level3 & WilTel (2005) Press release
Lightower Fiber & Lexent Metro (2010) Press release
Lightyear & SouthEast Telephone (2011) Press release
MegaPath & Covad (2010) Press release
MegaPath & Speakeasy (2010) Press release
MegaPath & IP5280 (2012) Press release
Microsoft & Skype (2011) Press release
NBS & Simlab.net (2008) Press release
NuVox and NewSouth (2005) Press release
NuVox & FDN Communications (2007) Press release
Oak Hill & Intermedia (2011) Press release
PAETEC & Allworx (2007) Press release
PAETEC & American Long Lines (2005) Press release
PAETEC & Cavalier (2010) Press release
PAETEC & McLeod (2008) Press release
PAETEC & Quagga (2010) TA blog post
PAETEC & US LEC (2006) Press release
Platinum Equity & Covad (2007) Press release
Qwest & OnFiber Communications (2006) Press release
ShoreTel & Agito (2010) Press release
ShoreTel & M5 (2012) Press release
Stage 2 Networks & CTI (2012) Press release
Talk America & NTC (2006) Press release
Talk America & LDMI (2005) Press release
TDS & OneNeck (2011) Press release
TelePacific & Covad Wireless (2011) Press release
TelePacific & Mpower (2006) Press release
TelePacific & O1 Communications (2010) Press release
TelePacific & OCiX (2011) Press release
TelePacific & Telekenex (2011) Press release
TelePacific & TelWest (2011) Press release
TPAC downgrade due to acquisitions 2012
TPAC increases loan fund $50m for acquisitions 2011
Time Warner Cable & NaviSite (2011) Press release
Time Warner Telecom & Xspedius (2006) Press release
Towerstream & ColorBroadband (2011) Press release
Towerstream & One Velocity (2011) Press release
Towerstream & Pipeline Wireless (2010) Press release
Towerstream & Sparkplug (2010) Press release
Twin Valley & ISG (2011) Press release
Utility Telephone & WPTI (2010) Press release
Verizon & CloudSwitch (2011) Press release
Verizon & MCI (2006) Press release
Verizon & Terremark (2011) Press release
West Corp & Genesys (2008) Press release
West Corp & Intercall (2003) Press release
West Corp & Raindance (2006) Press release
West Corp & Smoothstone (2011) Press release
Windstream & Nuvox (2010) Press release
Windstream & PAETEC (2011) Press release
WVT & Alteva (2011) Press release
WVT & USA Datanet
XETA & bluejack Systems (2004) Press release
XETA & Pyramid Communications (2010) Press release
Zayo & American Fiber (2010) Press release
Zayo & FiberNet (2010) Press release
Zayo & 360networks (2011) Press release
WHO'S BUYING WHAT NOW?
To create a short list of companies that might acquire yours you'd want to start with the companies listed first in the list above as they have already successfully acquired at least one company which therefore proves the access to resources and competence to pull off a transaction.
The list below is of companies that have made public their "desire to acquire". Read the press release and the additional listed information to discover what they're looking for and if your company might be on their shopping list.
Abovenet (2011) Press release
AireSpring (2011) Press release
BCN Telecom (2010) Press release Acquisition wish list & interview
Endeavor (2011) Press release
GLOBALINX (2012) Press release Acquisition wish list & interview
Lightyear (2010) Press release
PowerNet Global (2010) TA blast
Please email me if you'd like to have your company added to the list above or you would like TA to assist your efforts in being acquired by one of these companies.
PURCHASE PREPARATION CHECKLIST
Since recent history may tend to repeat itself amongst companies smart enough to amass the requisite resources for M&A activity, if you're looking to acquire or be acquired, consider the transactions listed above that involve a company similar to yours.
Company owner/entrepreneurs tend to want to make quick "gut check" decisions. Fortunately for most owners, they have enough financial partners around that will slow them down long enough to soberly consider a few questions designed to prevent M&A "buyer's remorse".
If you're a business owner prepping yourself to buy or get bought, but you still have to suffer the indignities of convincing your financial partners that your brilliant M&A idea is more than "half baked", you're really going to need to convince them that the M&A transaction you have in mind makes sense to normal people only half as smart as you. They're going to ask a whole lot of dumb questions. As a brilliant entrepreneur myself, I feel your pain.
But since you're really not going to get your M&A vision moving forward without your rich friends understanding and agreeing with your vision, TA has created the following checklist that you can use to help grease the old M&A skids. (Please email me items you think should be added to this list.)
For those transactions involving your peers in the list above, ask yourself the following checklist questions:
- Did your peer purchase or get purchased?
If you're wanting to get purchased but all your peers are buying (let's say you're nothing more than a rural telco like CenturyTel or WVT used to be) you might be out of luck.
- Was it a "fire sale" of distressed assets?
Just because a company gets acquired doesn't mean they got the 20x multiples that we all saw in the late 1990's (and still dream about). No one's told me directly, but I kind of suspect that more than one "acquisition" listed above might have been better labeled "euthanasia". Every company that's collecting customer payments or commissions on a monthly basis is worth something to someone -- even if that price is next to nothing.
- Was the purchaser buying "more of the same"?
This is the easiest kind of acquisition to understand. If a telecom reseller of some sort is making a decent margin on a specific kind of customer but is staffed up to handle twice the volume then it really makes sense for them to acquire direct competitors. The incremental margin is great because the overhead to accommodate the extra customers is already in place.
These kinds of purchases obviously never bode well for the non-sales employees of the company being acquired. Purchasers in these situations need to make sure the purchased customers don't leave with the terminated staff from the acquired company.
- Was the purchaser buying "something it needed but did not have"?
This is the second easiest type of acquisition to understand. It's often cheaper to buy a talented company already proven in the marketplace then to try and develop that same talent organically. Earthlink and PAETEC both showed these types of acquisitions recently where they are trying to put extra hooks into their network service customers by bringing IT managed services in-house by buying Business Vitals and Quagga.
These transactions can be a bit more risky for both parties to the transaction though if the functionality the purchaser is trying to achieve is simply too far off their core competencies. An example of such a transaction is Ebay's purchase of Skype where they eventually sold Skype again to Microsoft.
Skype employees will likely survive this second transaction but the employees of Pure Digital are were not so lucky. You may recall that the owners of Pure Digital, inventors ofthe hugely popular Flip Video sold to Cisco in 2009 for $590 million. In 2011 Cisco announced it was shutting the Flip division down and getting out of "that business". - Is their purchasing activity complete or do they still deed to buy more to "complete their vision"?
When buying "more of the same", purchasers with access to capital seem to want to keep buying until their gas tank is full (or the owner of the gas station holding their gas credit card cuts them off). Consider Level3. Will they ever be done buying?
On the other hand, when a company is simply buying a new "we need to be able to do this" service like managed IT, once they've bought the smart people they need from another company they often find it cheaper to expand that talent through hiring then buying more smart companies.
With the answer to these questions in mind, now consider the following:
- Which specific company or companies might buy your company?
There are a finite number of players in the telecom, IT and application space. If you're so sure that your company is an acquisition candidate then prospective financiers are going to want to know exactly who is on your short list of potential suitors that you think has the vision big enough and the pockets deep enough to actually do your deal.
- Do companies in this identified peer group have a history of M&A activity?
Just because a company ought to buy yours or even needs to buy yours doesn't mean it will. If the suitor you have in mind has never been involved in M&A then you'll really need to spend a lot of time on #6 below where you curry favor with an influencer who can champion your cause.
- Do they need you and your people or just your customers and your paper?
Maybe Cisco really wanted to be in the consumer video business when they bought Pure Digital and the Flip Video camera or maybe they just wanted the patents. If your suitors don't need your people, have you done something to protect what your suitor wants to buy from all your angry ex-employees after they get terminated?
And what about you? Are you the sales rainmaker? Would your company be just as profitable under your ownership a year from now if you took a year-long sabbatical? If the answer is "no", then your company might not be as prepared to sell as you think it is.
I'm sure you're a heck of a nice person and the acquiring company will certainly want you around to manage the asset migration -- but not likely long after that. Make sure your company can be profitable without you.
- Which of your direct competitors might also be an acquisition target?
This is important to know as it will come up in price negotiation if you're lucky enough to get that far. Your suitor's ardor may seem to cool off if you're not ready to debate knowledge about which other companies might make "just as good" an acquisition. - What makes your company the "pick of the litter" among acquisition candidates?
Knowledge of other acquisition candidates is one thing. Knowing and being able to communicate why the other candidates are unworthy of the suitor's attention is quite another. If you're even being considered in an acquisition then the suitor already knows why they like you. You need to be ready to help share why they might not want to choose your competitors.
Sure, it might seem like a bit of unpleasant business but M&A is a lot like politics and at the end of the day only one candidate "gets elected". Negative campaigning might not be your style but you need to be ready if it's needed -- your own employees and certainly your investors are counting on you to get the deal done. - Do you have any "champions" that can help improve your "curb appeal" and steer acquiring companies your way?
Who do you know that is seen as both objective and an opinion leader in your industry sector? What do these champions say about you and your company in public and then behind closed doors?
Very few successful acquisitions are the result of one rich person buying one perfect company after reading one article in BusinessWeek and making one phone call. Rich people are rich because they surround themselves with smart people. Who are the smart people that like you and hang out with rich people? - How can you get all the decision makers to Vegas to make a final decision?
At the end of the day some deals just don't get done until the deal gets both "shaken and stirred" under neon lights. I'm not exactly sure why. That's just the way some deals roll.
If you're not a Vegas kind of person but your suitor is, hire a consultant that can help you be more Vegas-like, within your professional boundaries, so your suitor does not get unduly distracted by your "totally Vegas" M&A competitors.
HOW CAN TELECOM ASSOCIATION HELP YOUR MERGER OR ACQUISITION?
While TA does not approach M&A with a completely Vegas mindset, we do bring seven chips to the M&A table which are:
- Contacts - TA is on a first name basis with a whole lot of people. And those we don't know directly we can get to know pretty quickly through TA's network of 3,800 members.
- Screening - TA has almost 10,000 records in our membership database. We know something about almost everyone who has ever been in the network services industry -- and we make it our business to keep track of that information and update it often.
- Introductions - TA's primary service is the formal introduction of business parties to one another. We do it at the lowest levels between customers and sales partners and we do it at the highest levels between potential parties to an M&A transaction. If our members know just one thing about TA it's that when we communicate with them it's to introduce them to a person, a company or an idea.
- Thoughtfulness - TA doesn't also specialize in matchmaking activities between owners of burger joints. We don't dabble part-time in pairing up the lovelorn. We do think about the perfect telecom deals though -- all the time. I am a telecom agent that also happens to own Telecom Association. My first love is selling communication technology solutions to multilocation businesses. My second love is figuring out which vendors can best combine their solutions to provide my customers the best outcome and value. All we do is think about things like, "Does this vendor and solution combination make sense?"
- Lawyers - Any talk about "merger-this" and "acquisition-that" is really only locker-room braggadocio until someone starts paying a lawyer to listen in and shake their head one way or another. TA has contracted with Telecom Lawyer Ben Bronston to facilitate all initial acquisition communications at no cost to inquiring M&A parties.
- Advice - When asked, we're pretty full of "this is what I'd do if it was my money" advice. We'll tell you both what we think and why we think it. We're not, "It's your money and I'm just here to observe" people. We only want to be involved with acquisitions that are held up as still "brilliant" five years after the acquisition is complete.
- Proper Compensation - TA doesn't need M&A fees but we do earn them. TA's normal business activities of introducing partners and vendors to one another pays all our bills. We like M&A though so we work hard to match the right parties. The compensation reminds us to work hard.
If you'd like to have TA help assist you with your M&A vision, whether you want to purchase, merge or get acquired, please contact me to arrange a confidential screening.
Related Articles
CLECs' Last Stand? December 2011
The Great Consolidation July 2011
Comments