As part of its Q3 report today, Cbeyond says it has formed a strategy committee that will evaluate both ways to accelerate its transformation and possible strategic alternatives. The possible alternatives could include M&A as either a buyer or seller and other strategic arrangements.
So what sort of consolidation event might Cbeyond wind up in? Let's ramble on a bit... The company's valuation remains quite low at less than 3xEBITDA, which means an expanded pool of potential buyers.
Perhaps a network operator with national tier 1 scope and cloud-based designs on the SMB enterprise space might see a chance to move $450M+ in revenue on-net while gaining the cloud-based managed service product suite at the same time. No, I'm not thinking Zayo, it doesn't fit that mold. I'm thinking of someone more like Windstream or Earthlink, or, come to think of it, Comcast or TW Cable.
tw telecom or Level 3 could make sense I suppose, but I don't think either is looking for this sort of asset right now. But another idea could be Birch, which could use it as a chance to gain true national scale and back into a public listing all at once.
It's a bit harder for me to see Cbeyond making a big move as a buyer given their current valuation, although I'd be interested to hear of any ideas readers may have on that side. They do have the benefit of having no long term debt on the balance sheet right now, so they could take on leverage for the right opportunity.
As for Q3 earnings themselves, Cbeyond's revenue came in light at $113.7M, with its legacy revenues pressured as its 2.0 revenues reached $17.8M. EBITDA dropped to $18.0M, while loss per share fell to $0.18 although that included a one time charge of $0.07 related to a fiber settlement. These transformations certainly don't happen quickly.
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