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Biggest M&A of 2017 and the Channel Impact

M&A

From CenturyLink finalizing its acquisition of Level 3 Communications, to Broadcom buying network vendor Brocade Communications, 2017 was another big year of M&A involving companies that do business in the channel.

And a number of the companies and/or assets fetched billions of dollars.

According to 451 Research’s M&A KnowlegeBase, there has been $319.5 billion in technology M&A in 2017, down from the $505.9 billion spent on tech targets in 2016, which was a bit less than the record total in 2015.

“Private equity is one of the few categories of buyers that’s more active this year than last,” said Scott Denne, research analyst at 451 Research. “Private equity firms and the companies they control spent almost $95 billion on more than 800 tech companies. Though those firms still have plenty of money to put to work, the pending tax bill could lower their ability to deduct interest payments and lower the prices they’re willing to pay.”

Gina Villanueva, an industry analyst in the consumer communications services group at Frost & Sullivan, said although AT&T’s Time Warner acquisition is still pending, wireless operators continued to advance their position in the communications market through M&A.

“For example, Verizon’s acquisition of Straight Path brings the communication operator one step closer in the race to deploy 5G, and T-Mobile’s bid at the 600 MHz FCC spectrum auction improves its coverage and experience for its users,” she said.

In the gallery below, we look at 10 deals that exceeded $1 billion and what they mean to those involved. We excluded acquisitions in which the financial details weren’t disclosed.

Datapipe's Robb Allen

CenturyLink-Level 3

A year in the making, CenturyLink’s $34 billion acquisition of Level 3 Communications closed, creating a networking services behemoth gunning for competing telcos globally.

About 75 percent of CenturyLink’s core revenue will come from business customers, and nearly two-thirds of its core revenue will come from strategic services. Its network now connects more than 350 metropolitan areas with more than 100,000 fiber-enabled, on-net buildings, including 10,000 buildings in EMEA and Latin America.

Lynda Stadmueller, Frost & Sullivan research vice president, said the merger is going to propel the new CenturyLink as a “very strong contender to the big two: AT&T and Verizon.”

Rebranding

Crown Castle-Lightower

In November, cell-tower operator Crown Castle International completed its acquisition of Lightower Fiber Networks for $7.1 billion in cash.

Crown Castle said the purchase enhances its position as the largest provider of shared wireless infrastructure in the United States, with about 40,000 towers, 50,000 small-cell nodes on air or under development, and 60,000 route miles of fiber nationally. Lightower owns or has rights to about 32,000 route miles of fiber located primarily in top metro markets in the Northeast, including Boston, New York and Philadelphia.

Crown Castle now has spent $10.7 billion on M&A in three years to build its small-cell network in the Northeast, southern California, Florida and Texas.

FatPipe's Ragula Bhaskar

Broadcom-Brocade

Broadcom completed its $5.9 billion acquisition of network vendor Brocade Communications. Brocade now operates as an indirect subsidiary of Broadcom and is led by Jack Rondoni, previously Brocade’s senior vice president of storage networking.

Hock Tan, Broadcom’s president and CEO, said his company has a track record of “successfully integrating and growing companies we acquire, enabling us to offer customers a leading portfolio of best-in-class franchises across a diverse set of technologies.”

“We intend to invest in and grow the Brocade business to further enhance its capabilities in mission-critical storage networking,” he said.

Aryaka

Verizon-Yahoo

Verizon Communications last summer completed its purchase of Yahoo’s core internet properties and real estate for $4.48 billion in cash.

The plan is to combine Yahoo’s digital advertising and media assets with Verizon’s AOL internet business, which it bought last year for $4.4 billion. Verizon also gains Yahoo’s ad technology tools, search, mail and messenger. Besides adding vital content, these assets could help Verizon better compete with Google Alphabet and Facebook in digital ad sales.

VeloCloud

Cisco-AppDynamics

Cisco launched a new software business unit by buying AppDynamics for $3.7 billion in cash and assumed equity awards. In a company blog, Rob Salvagno, vice president, corporate business development at Cisco, wrote:

“Together with Cisco’s … digital network architecture, customers will now have unprecedented end to end insight across their technology stack, from infrastructure to application. With this insight, companies will be equipped to improve customer experiences and accelerate revenue opportunities. The acquisition of AppDynamics also supports Cisco’s strategic transition toward software-centric solutions that deliver predictable recurring revenue.”

VeloCloud

Equinix-Verizon Data Centers

In May, Equinix completed its $3.6 billion purchase of 29 Verizon data centers. Equinix now has 250 former Verizon employees and more than 1,000 additional data center customers in its fold. Equinix got data centers in 15 metro areas in the U.S. and Latin America.

“With this significant expansion of Equinix’s globally consistent footprint, our platform is even more valuable to companies that are leveraging this new model of interconnection at the digital edge,” said Steve Smith, Equinix’s CEO.

Trusted Advisor

Tech Data-Avnet

Tech Data in February wrapped its $2.6 billion acquisition of Avnet Technology Solutions in a distribution agreement of massive proportions.

Tech Data says the acquisition greatly broadens its value-added distribution business, increasing its ability to help its partners capitalize on next-generation technologies. It also enhances its go-to-market capabilities with complementary skills, expanded vendor relationships and new customer sets.

Trusted Advisor

Cisco-BroadSoft

Cisco in October announced an agreement to acquire BroadSoft in a deal worth $1.9 billion.

In announcing the move, Rob Salvagno, head of Cisco’s M&A and venture investment team, said his company chose BroadSoft not only for its portfolio of cloud collaboration platforms and business applications – assets Cisco already holds – but for BroadSoft’s partnerships with more than 450 telecom carriers in 80 countries, including 25 of the top 30 globally, and some 19 million BroadSoft business subscribers.

Evaluate
BC Partners-CenturyLink Data Centers

In May, CenturyLink completed the sale of its data centers and colocation business to BC Partners, in a consortium that included Medina Capital Advisors and Longview Asset Management.

CenturyLink received about $1.86 billion in pre-tax net cash proceeds and a 10 percent equity stake in the consortium’s newly formed global secure infrastructure company named Cyxtera Technologies. CenturyLink used the money to partially fund its Level 3 purchase.

VeloCloud

Verizon-XO

In February, Verizon completed its $1.8 billion purchase of XO Communications’ fiber-optic network business.

Verizon said the purchase and integration of XO’s fiber network would help the carrier extend its suite of network services to its enterprise and wholesale customers. In addition, it would help the company in its plans to densify its cellular network, and to deploy new 5G technologies.


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