In the Metro Connect USA session titled ‘The Mergers and Acquisitions Update’, the panel discussed some of the biggest deals of the last year and what they mean for the shifting TMT industry as well as how the current wave in digital infrastructure investment could play out.
The session featured Kemal Hawa, Shareholder, Greenberg Traurig, LLP; Madonna Park, Global Head, Managing Director, RBC Capital Markets; Bill Fanning, Managing Director – TMT, Houlihan Lokey; Chad Crank, Managing Director, Grain Management; Nirav Shah, Managing Director, EQT Partners; Patrick Fear, Managing Director, AB - Private Credit Investors; and Garrett Baker, Managing Director & Head of Telecommunications, Media & Technology, Lazard Middle Market.
Baker said, “Everything is based on the increasing demand of broadband. For many end users, that demand has driven the need for additional investment.
“Also, the infrastructure funds entering all the different subsectors of telecoms and bringing a lower cost of capital to the space has changed the face of each of these sub sectors.
“Their willingness to classify assets as infrastructure and their LP’s allowing them to put them into buckets, which require lower rates of return has allowed valuations to move up quite dramatically.
Many companies, small and large, are finding themselves looking to technology-based solutions for business continuity planning and maintenance.
“If you look at the demand for these businesses even pre-COVID, it reflects the essentiality of these services particularly if you think about residential services,” added Crank.
“There are some consumer studies that found that if you take a hypothetical home that had to cut their budget by $100, they would rather cut groceries before they cut their broadband, which reflects how essential these services are.”
Crank said that COVID exacerbated many of the trends that were already in play before, which is set to bring permanent change to our behaviours as consumers.
“As the infrastructure funds continue to grow in size, it allows us to have the opportunities to transform businesses that are larger than what may have been possible a few years ago,” added Shah.
“I would expect these large deals to continue, but what is more important is what is underpinning that significant growth opportunity that remains regardless of the scale and size of the business.”
Joint ventures
GIC with Equinix and even more recently Adani Group with EdgeConneX are just two big and recent examples of joint ventures in the sector that spells a huge increase over the last few years.
Park highlighted that there is a lot of capital and many different types of capital are looking for a variety of investment opportunities.
“A lot of these joint ventures tend to happen with more passive capital providers who want the partnership with an operator and we have certainly seen it in the data centre space,” Park explained.
“We are seeing a lot of it in the fibre space as well. In many of these cases, it is a marriage of more attractive cost of capital, which is being paired with operational expertise by these companies, which is a win for everybody.”
