Consolidation in an Unstable Economy
November 21, 2008
With an unstable economy, we’re going to see more consolidation. Who do I see partnering and conjoining in all this?
I am expecting more M&A to emanate from foreign entities such as Reliance Telecom, Deutsche Telecom, T-Mobile, etc. What you will see, given the financial mess the world is in, the consolidation will be driven and valued on hard fixed assets. Carriers of the rental or co-location genre will get heavily discounted as broadband demand continues to grow and outstrips the need for or carrying capacity limitations of copper loops, T1, DSL, coax and SONET/ATM.
So what does that mean for AFS? What are AFS’s plans in this arena?
I have come to find that those out looking to acquire travel like lemmings. For example, if all the EBITDA multiples are 7x, then everything must sell at 7x. I am sorry to point this out to public shareowners, but this is as sophisticated as due diligence gets with some Investment Bankers. So a company like AFS that is growing, profitable and has probably the lowest churn in our industry can afford to wait until the lemmings move back up the scale. Companies not similarly situated, you get what you can when you can get it.
AFS is somewhere between a number of options, and as I write this, the option I prefer is management buying AFS from our existing investors and moving forward from there. We have often received unsolicited offers or inquiries of interest on a regular basis. Any decisions made will always be made in the optimal value interests of all our shareowners. As I stated earlier, there is no compelling reason to sell for less than optimal value in our case.
More to come on all this…
What’s your take on consolidation and the state of the economy? Shoot Dave an email or post a comment below.
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