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Birch Closes $323M Cbeyond Deal Sooner Than Expected

**Editor’s Note: Please click here for Channel Partners’ complete coverage of Birch’s acquisition of Cbeyond.**

Birch Communications Inc. said on Monday that its $323 million cash purchase of Cbeyond has closed.

The deal was announced in April and wrapped sooner than expected – Birch had been projecting an October completion date. But government approvals went quickly, a spokesman said, and the purchase solidified on July 18.

Cbeyond’s stock no longer trades on the NASDAQ.

Birch and Cbeyond will continue to operate as two companies for the next 30-60 days as they integrate. When that’s done, all websites, billing, contracts and collateral will feature the Birch logo.

Meantime, it was not clear whether Jim Geiger, chairman president and CEO of Cbeyond, would remain with Birch. If he leaves the combined company, he stands to pocket $2.4 million in cash, equity awards and other compensation. Vinnie Oddo remains head of the combined company.

Cbeyond represents Birch’s 21st acquisition since 2006. It gives Birch a leg up in cloud and managed services, thanks to Cbeyond’s traction in those areas as it worked on its “Cbeyond 2.0″ initiative. However, those efforts to move away from circuit sales and target multilocation enterprises with cloud and managed services, and even mobile devices, did not gain the traction Cbeyond and its executives and investors had hoped to create. 

As a result, Cbeyond in 2013 started investigating “strategic alternatives,” including a sale. In April, it chose Birch as its buyer, news that came as a surprise to the industry. Rumor had pinpointed larger providers, including MegaPath, as likely buyers. Birch, though, made the most alluring offer, including agreeing to assume Cbeyond’s channel partner contracts – something it had not done in previous acquisitions.  

And the combination of Cbeyond and Birch made sense. That’s because Birch has spent the past several years redefining its business model so it could avoid the fate of many of its fellow competitive service providers: crashing and burning due to failure to transition from offering telecom-only connectivity to provisioning complex communication services.

It further has taken advantage of the fallout around it and picked up names including Lightyear Network Solutions and Ernest Communications at fairly low prices. Such deals have allowed Birch to expand from a regional to a national footprint, and put more enterprises and multilocation firms in its sights.

Now, Birch is looking ahead to continued growth. The company said on Monday it will generate about $700 million in annual revenue and boast 200,000 business customers in all 50 states, the District of Columbia, Canada and Puerto Rico. Its IP network covers 22 states and Washington, D.C. It comprises 31,000 fiber route miles, more than 550 fiber-lit buildings, 594 network colos and six data centers.

Birch will remain headquartered in Atlanta and is turning Cbeyond’s Atlanta facilities into its newest operations center supporting customer care, engineering, sales, operations, finance and marketing. Birch owns two other such centers – one in Macon, Ga., and another in Emporia, Kan.

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