On Tuesday, I ran this poll asking readers to choose the companies most likely to be aggressive in M&A this year. I’ll leave the poll open for a while yet, but the results are clear enough already to discuss a bit. Zayo, tw telecom, Level 3, Earthlink, and Windstream make up the top 5, in that order. My own votes were only partially overlapping with that list.
Zayo – Agreed, actually I’m slightly surprised that Zayo didn’t get an even higher percentage of voters to select them as one of their top three, and not because they announced the purchase of a data center property an hour after I posted the poll. Zayo has made several purchases a year since it was created, and 2012 is not likely to be different.
tw telecom – Actually, while I always think they *should* have been more active inorganically, there have been few signs that TW Telecom (NASDAQ:TWTC, news, filings) is going to leave the sidelines. They have had an entirely organic focus since closing the Xspedius deal more than five years ago now, and they seem to like it that way. I still think that when Icahn finally sells XO it is tw telecom that has the best strategic fit, but I’m not sure they want it as badly as others might.
Level 3 – Really? I don’t think Level 3 buys much of anything this year, and if they do it will be abroad. I think their investors are done diluting themselves for domestic assets now that GLBC has brought what ought to be sufficient scale. A few months ago I suggested their next strategic target could be Colt, but I don’t know that there’s a strategic driver for it at this time.
Earthlink – Agreed on this one, but they were #2 on my list. While they’re busy integrating what they have, this puzzle is still missing a few pieces. Earthlink will be actively looking to find them.
Windstream – Actually, I think the PAETEC integration and their cloud efforts will take up most of their operational mojo, and I’m not sure how likely it is that they will make another move for a year or so. They could use some fiber out west, but at the moment I think they’d prefer to let it come to them rather than actively seek out targets. But they definitely aren’t done either, so it’s certainly possible.
So just two of my five agreed with your picks. My third pick? Actually, I voted for TelePacific. I think the Tel West purchase was a foot in the door of a larger strategy that will be further developed in 2012. As for the rest, I’m curious just what the guy or gal who picked Fairpoint was thinking? I mean, anything could happen, but the most likely to acquire? Hmmmm.
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Categories: CLEC · Mergers and Acquisitions · Metro fiber
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Rob,
My picks were #’s 3, 4 and 5 on your poll and the logic was that those companies are the one’s that MUST migrate away from their existing core business– and the only efficient way to do that is acquisition. Below is a very recent quote from the CTL CFO which highlights this– these three companies must move away from declining retail products and toward enterprise service to get top line growth.
“But the key really to the future is stabilizing the top line. And that’s really what we’re trying to do with respect to the acquisitions that we’ve done, getting more focused on the business customers which have a much more stable revenue stream and we think provides upside as the economy hopefully improves over the next couple years or so.”
For some acquisitions are attractive and for others they are a necessity. CTL, Earthlink and Windstream NEED to acquire. Of course, I could be completely wrong about this.
Oh, btw, the poll probably should have been dollar weighted (size) in terms of who will be most active. Size matters.
Earthlink needs to fill the hole from Mississippi west as they have essentially no network. Look for integra to aggressively buy because organic growth won’t create and return value fast enough for their new CEO who is on a mission to prove his value. I also think Telepacific will do some work in M&A but on a smaller scale.