There's a Reuters interview out over the weekend in which Bill LaParch, CEO of AboveNet, sounds eager to make his company's first M&A move. Most of that is via the word 'keen' in the title rather than actual quotes, but still. He also suggested $600M in debt as a level that AboveNet could support to make a deal happen. I have long thought that AboveNet made a better buyer than seller in the M&A arena, despite the rumors over the summer. Let's take a quick survey of what they might want to buy:
The obvious candidates:
- Sidera Networks - The article quotes industry analyst Donna Jaeggers suggesting Sidera as a likely target, and I don't disagree that it's a reasonable idea. However, ABRY was shopping Sidera over the summer and apparently didn't get its price - I don't think much has changed. Also, I tend to think AboveNet would focus its M&A on geographies where it is weaker than the Northeast.
- FiberLight - Of all the other metro/regional fiber builder/operators out there that match up, I think FiberLight is closest strategic fit. Their Florida footprint would give AboveNet a substantial boost in the state, especially in Miami where AboveNet recently established a foothold. Meanwhile, the Atlanta and DC/MD/VA, and Texas footprints would be very complementary. However, FiberLight also was on the market over the summer when AboveNet could have bid, so perhaps nothing has changed.
- FPL Fibernet - Again Florida assets, with some in Atlanta and Texas to go with it. Strategically, Florida feels like a place AboveNet might do via M&A IMHO, and FPL would be the most straightforward way to go about it. While they are perhaps the most aggressive of the US fiber assets owned by an energy utility parent, FPL could easily decide to monetize the asset.
- Fibertech or Lightower - both would add regional depth in the northeast for AboveNet, but are owned by private equity that seems interested in operating/building/acquiring on their own for now.
There are less obvious candidates out there though, both domestically and not. Here are a few examples.
Single market fiber assets:
- DQE Communications - Pittsburgh would be a straightforward addition to AboveNet's US markets, though perhaps it isn't on their short list.
- SRP Telecom - AboveNet is in Phoenix, but nowhere near as extensively as they would be with SRP's coverage.
- Sunesys - We don't hear much from Sunesys, but the full national fit with AboveNet seems quite attractive.
- Access Fiber Group - Tier 2 market entrypoint - Birmingham, Nashville, Milwaukee, Charlotte.
non-USA expansion targets:
- Fibernoire - Toronto, Montreal, and Quebec City. AboveNet is already working on Toronto of course.
- euNetworks - yet more scale in London, and a quick way to a greater German presence? I doubt they're for sale right now though, and there's some history between the two.
There are others, but those are the main ones that seem like reasonable targets to me. But AboveNet has been quite disciplined, and I think it's very possible that they may prefer to make a move only if/when pricing comes down.
Any other possible/likely/outlandish targets out there? I'd love to hear them and promise to give my take, so leave a comment.
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